Tag Archives: credit score

Establishing Credit for the First Time

credit cardThis week I want to share some wonderful stories and experiences I read from Clark Howard’s new book, Living Large for the Long Haul. In it, he shares the stories of over 50 different people from all socio-economic backgrounds who have improved their finances even through The Great Recession.

Many readers have expressed interest in establish or improving their credit score.

Building a Solid Credit History

Whether you are on your own financially for the first time or you’re getting used to the American credit system as an immigrant, you’ll find Patricia’s story helpful and encouraging. Coming to the United States in 1990, Patricia found herself bewildered by the new financial system, which included 401(k)s and credit scores.

She started off with small goals, such as building up and some savings and she learned how to get bargains on what she bought. From there, she got a credit card that she paid off every month, slowly establishing a credit history. She also started investing for retirement and she eventually got a mortgage, five years after coming into this country.

Best Ways to Establish Credit

If you’re looking at getting some credit established without straining your finances, there are a few things you can do:

  • Get a Secured Credit Card: As the name implies these credit cards are opened when you deposit a certain amount of money as collateral. I suggest looking at local credit unions or small banks to get you started as you’re more likely to get a better deal with them. Double check all the terms before signing up. You don’t want a card that will hit you with a ton of small fees.
  • Stay Away from Store Credit Cards: While many credit cards are notoriously easy to open, they are just as known to have some pretty bad interest rates and fees. That can hurt you if you get hit behind on payments due to the extra costs of having the card.
  • Become Familiar with Your Local Credit Union or Bank: With a smaller financial institution, you can get more assistance and face time to help you avoid the pitfalls of having a card.
  • Pay off Your Balance in Full: Since 35% of your credit score is based on your payment history, make sure you only use your card on small charges that you can afford to pay off each month.

When establishing credit, make sure you’re thinking long term. In time, you can build a solid credit history and still be able to keep your money in the right spot.

Getting Your Free Credit Report and Score for Free

credit sesameIf you’re looking for a free option on checking your credit reports, you can use Annual Credit Report. You’re entitled to review all 3 of your reports for free. This is a completely free site – no trial and no membership sign-up.

I want to mention, though, while you can get your credit reports through Annual Credit Report, you can not get your credit score.

You can use free option like Credit Sesame to get a credit score using data from Experian updated monthly. The free membership (no credit card required) allows you to see your credit score and you can also get suggestions on ways you can save money on your finances, like mortgages or credit cards. I wrote a review on Credit Sesame if you’re interested in how it works.

Establishing Credit

How many of you are trying to establish credit right now? What have you found incredibly useful for you? What obstacles have you had to face?

Photo Credit:   by 401(K) 2013

Resuscitating Financial Health One Credit Point at a Time

erase bad credit score

A single number can destroy your financial health, and that number is your credit score. Your credit score represents your monetary wellness. It can prevent you from taking out a loan or purchasing a car — just like how your first and last name on the Internet and social networking sites can prevent you from getting a job because of your 
online reputation
. Perhaps it’s time to address and clean up areas in all aspects of your life. Myfico.com can help repair a poor credit score though just like how Reputation.com can restore a negative online image. First, find out your credit score. You may be in financial trouble without even realizing. The following will help you learn more about credit ratings and what you can do to maximize your financial health.

What is a Credit Score?

A credit score is a three-digit number that represents the level of risk you pose when a bank lends to you. While several credit-scoring options exist, the most commonly used one is the FICO score. This score is made up of the following elements:

erase bad credit score

  • Payment history on debts – 35 percent
  • Amounts owed on debts – 30 percent
  • Length of credit history – 15 percent
  • New credit – 10 percent
  • Types of credit used – 10 percent

FICO scores fall between 300 and 850, and a higher number is a better score.

Your credit number is important because it affects your ability to get a loan or other form of credit. Lenders look at borrowers and decide how much of a risk borrowers pose. The higher your credit score is, the lower your risk is to the lender, and thus chances of getting the loan increases. Other factors must show that you have the ability to repay too. Use free services like Credit Sesame to learn your current credit score.

What Is a Bad Credit Score?

A FICO score of 620 or lower is considered bad credit, according to Bad Credit Offers.com. The “bad credit” cut-off point will vary from one lender to the next. A bad credit score occurs either because you have little credit history from which to create a credit rating or your credit history has a negative factor that lowers your card.

A bad credit score can cost you significant amounts of money. If you find a loan despite your bad credit, expect to pay more in interest rates, warns Experience.com. As a high-risk borrower, you may also experience difficulty in purchasing affordable housing. Landlords evaluate credit scores during an overall risk assessment while approving your application. You may even find that your car insurance premiums go up and employers are less willing to hire you — all because of your poor credit.

How to Fix Bad Credit

Bad credit is serious, but it can be fixed. The Federal Reserve recommends the following tips:

  • Get a copy of your credit report and ensure it is accurate.
  • Start paying bills on time.
  • Know how credit scores are figured.
  • Learn the actions to take to correct errors.
  • Research credit-repair services, which are often scams.

Your credit will improve in time. If you need to see fast improvement, MSN recommends these tips:

  • Pay down credit cards to less than 30 percent of the credit limit.
  • Use cards minimally or in an emergency.
  • Check credit limits for accuracy.
  • Ask credit card companies for “goodwill adjustments” on an occasional late payment.
  • Dispute old negative reports, as most collection agencies will not verify that the account was yours if it is old enough.

Your credit rating is a valuable tool in your financial stability and flexibility. A low credit score does more than just make it harder to get a loan. It can cost you monumentally, so learn what your score is, and then take the time to heal a bad one.

Megan Ericson is a real estate agent and financial consultant for local SMBs, Megan shares insights on how to organize your finances.

How Your Credit Score is Calculated

finding your fico credit score

While the exact formula is not given, but  FICO has shared a few of the factors that they taken into account and how they weigh them.

finding your fico credit score

  • 35% Payment History
  • 30% Amount Owed
  • 15% Length of Credit History
  • 10% New Credit
  • 10% Types of Credit

Source: MyFico

Your credit score from each bureau is a number between 300-850 that each of the credit agencies assign based on the information on your credit report.

In theory your scores between the 3 bureaus should be similar since they are pulling the data, but sometimes errors and missing information can mean that your scores differ greatly.

Getting Your Free Credit Report and Score for Free

credit sesameIf you’re looking for a free option on checking your credit reports, you can use Annual Credit Report. You’re entitled to review all 3 of your reports for free. This is a completely free site – no trial and no membership sign-up.

I want to mention, though, while you can get your credit reports through Annual Credit Report, you can not get your credit score.

You can use free option like Credit Sesameto get a credit score using data from Experian updated monthly. The free membership (no credit card required) allows you to see your credit score and you can also get suggestions on ways you can save money on your finances, like mortgages or credit cards. I wrote a review on Credit Sesame if you’re interested in how it works.

How Is Credit Sesame Free?

As you probably figured, nothing is ever truly free, so how can you get your credit score from Credit Sesame without paying for it? Basically when you log in to check out your score, your finances on your credit report are analyzed and you may be offered deals based on the data. The site looks at your current loans to see if there is a better deal out there that you may be interested in.

Your Credit Score

When was the last time the two of you checked your credit reports? Do you have an idea of what your credit scores are?