One Punk Number You CAN Control

Brace yourself: unfortunately, there is no quick fix for repairing credit. When you’re trying to lose weight, you know it took some time to put those extra pounds on in the first place; it’s going to take some time and energy to get them back off again. Improving your credit standing is a similar process. And just like  improving your physical health, a healthy financial lifestyle will prove to be well worth the effort.

Credit is a vast topic. One little newsletter couldn’t begin to delve into the depths of it, but here are some pithy dos and don’ts to consider, as you begin to tackle the task of improving your credit score.

• Pay your bills on time. Ok, this one sounds obvious. But this is the biggest component of your score, and nothing will help you more than consistently paying every bill on time, every month. If you’ve been late in the past, make every effort to get current and stay current. The more time you put between you and a late payment, the less it is affecting your score.

• Pay down balances. This is easier said than done, but if you carry high balances on, say, your credit cards, it can be hurting your score. You certainly don’t want to be maxed out, so keeping your balances at about 30% of your available credit limit will be optimal for your score. 

• Check your credit report. People underestimate the value of this one. The stats differ on this, but suffice it to say that the credit bureaus make plenty of mistakes in calculating your score—sometimes big enough mistakes that you get denied credit. So pull your free report one time per year from each of the 3 bureaus (that’s 3 times a year total) from annualcreditreport.com, and check it for accuracy. If there is a mistake, you should dispute it with the bureau. 

• Don’t close old accounts. Say you’ve had this American Express card for years, you’ve always paid it on time, but you don’t use it any more. It might be tempting to close it—but freeze. One of the components that make up the credit score is the length of time you’ve had credit. By closing that old account, you’d actually be hurting your score. Friends don’t let friends close good-standing, old accounts.

• Don’t apply for a lot of new credit. We mentioned checking your own free credit history each year—and note: doing this does not hurt your credit score. What will ding your score is when you
  apply for new credit, allowing the lender to pull your report. So when you went and applied for an
  Old Navy charge card, a Home Depot card, an AmEx card, a car loan from your credit union, and a
  mortgage from a broker, all in one week—you really weren’t doing your score any favors. Lenders
  see massive increases in credit availability as a risk, and each time you apply for credit, your
  score takes a little dive.

• Have different types of credit. It will help your score if you have both revolving credit (such as a credit card, where the balance can fluctuate each month), and installment credit (such as a car loan, where the balance is paid off over time). Don’t go apply for credit willy-nilly just because you think it will help your score, though—be wise and calculating in the credit you take on. 

While this list is by no means exhaustive, it will certainly get you going in the right direction. Much of improving and maintaining good credit is patience and consistency. You are capable of taking the reigns over your finances—don’t let your life be run by some punk 3-digit number!

If you find you need assistance with any of these items, the Family Life Center is here to help you, as always!