Today, I've collaborated with CreditRepair.com to teach you some tips and tricks about your credit score so that you can improve your financial situation.
Do you know what your credit score is? Surprisingly, many people do not know their credit score!
But first, do you know what a credit score is? Just in case:
Your credit score is a three digit number showing others (such as lenders) your creditworthiness, and is often used as an indicator of how risky you are.
There are three main credit bureaus, which is why you may occasionally see different numbers. The main three (TransUnion, Equifax, and Experian) calculate scores depending on the information they have about you, and your credit history and credit score may vary a little between the three of them.
Lenders and other people who may be looking into your credit score usually have varying opinions about what a bad, good, or excellent credit score may be. In general, a good credit score is usually 700+. The higher your number, the better your credit score.
Your credit score can impact the interest rate you receive on a car loan, buying a home and the mortgage rate you receive, attaining a rental home, getting a new job, your car insurance rate, and more.
Even though your credit score can change your life in a significant way, that doesn't mean it's hard to improve your credit score. Yes, it can be easy to hurt your credit score, but it can be easy to improve your credit score too!
What determines a person's credit score?
There are five categories that make up a person's credit score. Here's a breakdown of these five categories:
- 35% Payment History- Your payment history has the largest impact on what your credit score will be. This category includes if you pay your bills on time, if you have missed a payment, if any of your bills have been sent to collections, and so on.
- 30% Amounts Owed- This is the next largest category when it comes to your credit score. This includes your balances, your utilization rate, and more.
- 15% Length of Credit History- The age of your accounts DOES matter when it comes to your credit score. This is why it's usually a good idea to keep a credit card that you've had for a long time. I still have a credit card I opened when I was 18. It has no rewards, but it improves my average account age. However, only do this if you know you won't go into debt.
- 10% Credit Mix- This includes the specific type of accounts you have, such as whether or not you have credit cards, a mortgage, car loan, student loans, and so on.
- 10% New Credit- This credit score breakdown category includes things such as how many hard credit inquiries you have and how long it's been since you last opened a new credit account. It is important to remember that checking your own credit score does NOT impact this category as long as you receive your credit report from a company that is authorized to give you your credit report.
How can a person improve their credit score?
After reading all of the above, I'm sure you're wondering how you can increase your credit score.
Here are my general tips for increasing your credit score:
- Make sure to pay your bills and accounts on time. Late payments can hurt you.
- Regularly check your credit report.
- Keep your balances and utilization rate low.
- Ask for your credit limits to be raised.
- Pay before your credit card balance is reported.
- Keep your credit card accounts open if it makes sense (if you think you'll go into debt with them open or if the annual fees aren't worth it, you may want to think about closing them instead), so that you can lengthen your credit history.
What is credit repair?
With Credit Repair, you can be helped with repairing your credit score. If you're looking for a way to repair your credit score but need help, then CreditRepair.com has a credit repair service that you may want to look into.
Their previous members have seen an average 40 point TransUnion credit score gain during just four months of membership with their service.
Plus, on average, past CreditRepair.com members have seen 7% of their questionable credit report negatives removed per month.
With their services, they will help you to: 1) Repair your past – They work with the credit bureaus and your creditors to challenge the unfair or inaccurate negative report items that affect your credit score. They'll ensure your credit history is up-to-date, accurate, and reflects you honestly; and 2) Monitor what's going on – With Credit Repair, you also receive 24/7 Credit Monitoring & Alerts powered by TransUnion keep you aware of the changes and updates on your report, and provide customized information and advice about how those reported items affect your credit score.
Do you know what your credit score is? Why or why not?
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Asking for your credit limit to be raised is great if you need more available credit limit to lower your utilization rate. However, if you can keep your balance low as it is and you are under that 30% or so best suggested for credit, then it isn’t always wise to raise the limit. A hard inquiry will actually ding you a few points on your credit score. But you can surpass that if the bank offers it to you instead of you going to them. Depends on the bank and situation of course. Some may not be use a hard inquiry. Thanks for sharing. Great tips.
Thanks!
Before, I never cared too much about my credit score but these days I’m realizing how important it is.
One thing I do is to pay off my credit card debt as quick as possible which has multiple benefits.
I avoid paying that scary interest and my credit score won’t be negatively effected.
Thanks Michelle for recommending a service that can improve my credit score. I’ll definitely check them out.
Thanks Cory!
I’m so glad you posted this! I feel like too many young people don’t understand how important it is to pay attention to your credit score from day one…it’s something I’ve written about in my blog because getting my score back up after getting myself into credit card debt has been one of my main goals.
I have personally made or seen others make financial mistakes at a young age before they knew any better. Mistakes that hurt their credit score for years afterwards, whether it was missing payments, not keeping track of bills and letting them go into collections, applying for a bunch of different credit accounts at once or just not establishing credit at all.
Not worrying about your credit is a mistake that can and will cost thousands of dollars down the road.
Again, thanks for sharing!
Yes, sadly, many people do not understand how it works.
Hi Michelle,
Well explained everything.
My credit score lies between 800-900 since I pay my credit card bills on time. However, I have various loans & EMIs on my card.
I learnt many things from this post.
Keep sharing & inspiring.
Thanks,
Avinash
I think that this is a very valuable post. If I may add my two cents, I’d say that monitoring your credit score is super important, with the caveat that many services that will provide your score (both free and paid) do not actually provide your FICO score (still the score that most lenders use, as far as I know). They use other scoring formulas (such as VantageScore) that may or may not resemble the FICO score, but at least give you an idea of your overall trend.
That said, credit card companies are starting to provide credit scores for free to their customers, including FICO scores or variations thereof.
I would say that it’s critical to start monitoring your credit score at least 6 months before requesting major financing (such as a mortgage) in order to (a) know it and improve it (if needed), and (2) allow time to correct any mistakes on the credit reports, since the dispute process can take 30 days.
With a background in residential property management, I’ve always been exceptionally careful about my credit score. I can’t tell you how many apartment applications I declined because of poor credit. Even iffy credit is an issue when you’re trying to rent an apartment because it might require a co-signer. And it is embarrassing to ask your mom to cosign your apartment lease when you’re nearing 30!
Credit repair is so worth looking into if you’re not happy with your credit score!