The Importance of Your Credit Score
Understanding the value of your credit score is an important first step to improving your financial health. Anyone who has ever applied for a loan to purchase a car or house has encountered their credit score. This elusive figure can be perplexing, a three-digit assessment of your credit worthiness that has the potential to impact your financial health. We offer insights into understanding your credit score and taking steps to improve it.
What’s In a Number?
Your credit score most commonly used by lenders is FICO, a three-digit number from 300 to 850. It fluctuates continually, reflecting the interest rate of your credit cards, outstanding loans and even a lack of credit. Did you know that canceling credit cards can also negatively impact your credit score?
Aim for at least a score of 700, a good figure by many lending standards. You can request a copy of your credit report from the three major credit reporting companies — Experian, Equifax and TransUnion.
Credit Worthiness
Check your credit report periodically — making sure that there are no errors, while using it as a tool to make sure that you’re paying your bills on time and staying within your established credit limits. Such actions have the potential to increase your credit score. If you spot any errors, report the discrepancies to the appropriate credit bureaus (the report may differ among the three). They are required to take reasonable steps to correct any errors.
Improve Your Score
Not satisfied with your credit score? There are a number of steps you can take to improve it — like paying your bills on time, decreasing the amount of debt you carry and staying within your established credit limits.
Having an ample amount of credit available such as a home equity line of credit could potentially increase your credit score. This is referred to as the credit utilization ratio. The idea is to have a large amount of credit available and then utilize only a small fraction.
By taking control of your credit score, you are taking prudent steps to improving your overall financial health. If you are interested in increasing your financial literacy and would like to discuss your financial planning or investment strategy needs, we welcome you to Contact Us to set up time to discuss further.
Disclosure:
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal.