Just about everyone who has been an adult for any amount of time knows the importance of establishing and maintaining a good credit score. It is your credit score, as determined by the three credit reporting bureaus, that determines your creditworthiness. Lenders of all sorts, and even landlords and insurance agents, are likely to pull your credit history practically before they shake your hand and say, “Nice to meet you.”
Do you know your credit score?
Credit scores are calculated by looking at your income, your expenses, the amount of credit you already have, and how well you have paid your bills in the past. By looking at all of these different items, the credit agencies apply a mathematical formula, calculate your credit score, and report their findings and determinations to those who inquire about your creditworthiness.
Information that may have a negative impact when your credit score is calculated incude:
• A large amount of outstanding debt.
• A low income-to-debt ratio.
• A bankruptcy.
• Late payments
• No credit history
• A limited credit history
• Unpaid utility bills
• A lot of open credit accounts, even if they have low or no balances
• A lot of accounts being opened at the same time.
• Closing accounts that still have a balance.
• Closing a lot of accounts at the same time.
If you are attempting to calculate your own credit score, you may find it difficult to do so, as there are quite a number of variables involved, but if you follow the simple strategies below, when your credit score is calculated, you are likely to have a pretty good score:
• Apply for only one type of credit at a time and wait for a few months before applying again.
• Pay your utility bills (electricity, cable, water, phone) on time each month.
• Live within your means.
• Make all credit card or other credit payments on time.
• Pay more than the minimum due on your credit cards.
• Use credit cards to buy necessities such as groceries, but only if you have the willpower to put the same amount of money away and pay for them in their entirety when the bill comes in.
• Maintain a savings account for emergencies.
• Save up for the purchase of expensive items rather than charging them all the time.
• Check your credit history periodically to make sure it is accurate.
• Correct errors on your report promptly.