Heading into the New Year means a fresh start filled with new resolutions and goals to hit in 2020. By now, you’ve likely been exposed to a little something I’d like to call the credit world – whether it was financing a car, renting your first apartment, or planning an interior design upgrade for your home.
Surely you have some financial goals you’re looking to achieve this year, and your credit score will be a key determining factor in achieving them. So, you may be asking yourself why your credit score matters and how you can exercise a bit of financial responsibility to improve your credit standing.
If there’s one undeniable thing, it’s the plethora of perks you can enjoy by having a strong credit score: lower loan rates, lower insurance rates, no issues with employment or mortgage applications, and an opportunity to qualify for reward-based credit cards.
Here’s a crash course in all things related to your credit score and how you can make yours shine in 2020.
Do I Have More Than One Credit Score?
The answer is yes. There are three main credit bureaus – Experian, TransUnion, Equifax – each has their own rendition of your report and could possess different data.
You embark on a journey to find your new dream home or buy a car, it’s important to request your report from all three companies, so you can address any erroneous or incorrect information that may be hurting your credit score. According to a credit repair Austin expert, while there are two main credit-scoring companies, FICO and VantageScore, a majority of lenders utilize the FICO Model. FICO leverages a sliding scale from 300 to 850 to evaluate whether or not an individual may pose a risk when it comes to repaying borrowed funds.
What Really Matters When It Comes to My Credit Score?
If you want to possess a good credit score, there are two major things to keep in mind: always pay your bills on time and stay below 30% of your total credit limit when utilizing a credit card.
While lenders use your income, employment, and even your tax returns to gain crucial insight into your financial picture, it’s your credit score that ultimately proves your consistency and stability when it comes to your finances.
Other factors that influence your credit score is how long you’ve had credit (are you a recent grad just starting out or a mother with kids in college?), your debt to income ratio, and what type of credit mix you have.
What to Do If Your Credit Needs a Little TLC
If you’ve toasted to the New Year too soon, and discovered you have a not-so-great credit score, don’t fret. With a little effort and consistency, you can improve your credit score and enjoy the lifestyle you’ve always envisioned for yourself.
To get started, you should first review your reports and file a dispute if you identify any inaccurate or missing information. Be careful, however. You will need to supply supporting documentation to back up your claims.
As mentioned earlier keep your credit balances low and pay your bills on time. A whopping 35% of your credit score is based on your payment history. One mistake many individuals make is closing old credit lines.
It makes perfect sense – you’ve paid it off and don’t use it. But the truth is, by keeping older credit lines open, you can improve your credit utilization ratio, which will help raise your credit score.
Now that you’ve rung in the New Year, it’s time to get your financial picture in a healthy place. By following these tips, it’ll give you much more freedom when it comes to applying for loans and getting the best interest rates possible.
You may also be interested in: How to Improve Your Relationship with Money
Writer: AdrianDisclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.