Staying on Top of Your Credit
In this article, we will be going over the importance of your credit score, and how you can stay on top of it. We will also introduce some online tools you can use to help you monitor your credit for free.
As far as your financial life is considered, no single number is more important than your credit score. The quality of your score will influence a great many things, such as:
- Your ability to purchase a home. The higher your score, the better mortgage rates you'll get. If your score is low, you may not even be able to qualify for a home loan at all.
- Whether you can get credit cards, and how high your credit limit will be. A lot of the credit cards with the most favorable terms and good rewards only accept people with a good credit score.
- Your ability to rent apartments. The best apartments can be picky, and may only accept tenants with a relatively high score. If you have a good credit score, you may also qualify for a smaller deposit to get your unit.
- Whether you can get a job in a financial field like banking. Not all jobs will run your credit, but if you're applying for a job where you will be handling money, there is a good chance your potential employer will want to know your credit score. A low credit score may not automatically disqualify you from getting a job, but it will be a negative mark that could hurt your prospects.
- Your ability to buy a car. Unless you plan to pay in cash, you'll need a loan to purchase a car. If your credit score is less than perfect, you'll have to make higher payments.
And that's just the tip of the iceberg. For obvious reasons, you want your credit to be as high as possible. A common myth is that not having credit cards will raise your credit score. This is in fact untrue. To get a high credit score, you must have some debt and show that you can manage your debts well. The best way to do this is by opening up 3-4 credit card accounts. However, you should maintain a low balance on each of them, and make ALL payments in a timely manner. Even one payment that is sent in late can negatively affect your credit score for years.
Your credit score will generally be a number from 300 to 850. The higher the number, the better your score is. Generally, a score above 700 is considered good. If your score is above 750, you can expect to get the best rates for credit cards and mortgages. The length you've had your credit accounts is a factor that determines your overall score, so you should open up credit card accounts at an early age, and keep them open for a long time, even if you do not use those cards.
It takes years of positive credit history to attain the highest scores. Once you have a good credit score, it is equally important to maintain your high score. The best way to do this is by joining a credit monitoring service. There are numerous services you can sign up with, but Experian and Equifax are two of the more popular ones you may want to consider. In many cases, you can get free trials for such services. In fact, you can get free trials for many services online such as Gamefly, and you should be taking advantage of them on a routine basis, if you aren't doing so already.
If you don't require close monitoring and just want to know your credit score, a good site to register with is CreditKarma. This site will provide you with your credit score from two different agencies. By joining CreditKarma, you will be able to therefore monitor your credit in a basic way, which is sufficient for most consumers. If you have concerns about identity theft, however, you may want to join a more robust service that will charge you a monthly fee. The lower end paid services generally charge around $10 a month, and this might be worth paying for the peace of mind you'll get in return.
If you have damaged credit, it will take years to raise your score. The best way to raise your score is by keeping a few credit card accounts active and make sure you do not miss any payments at all. I know people who faced foreclosures who were able to repair their credit score over the course of 3-5 years by following this strategy. If your credit score is particularly bad (500 or lower) then you may also need to talk to a professional credit counselor for additional ways to improve your credit.
For additional tips on raising your credit score, I recommend viewing the following video: