Having a good credit score can help you improve your financial health, especially in times of economic uncertainty. Interest rates are on the rise on all kinds of products, from student and personal loans to credit cards and mortgages. As a result, it's more expensive to borrow money than in previous years.
5. Only apply for credit you need. Every time you apply for a new line of credit, a hard inquiry is pulled on your report. This type of inquiry lowers your score temporarily. Applying just to see if you get approved or because you received a pre-qualified offer of credit is not a good idea. If it’s a single hard credit pull, the drop will be slight. However, a string of hard inquiries could signal to lenders that you are taking on too much debt. The effects of a hard credit pull on your score, according to a representative of TransUnion, can last up to 12 months. If possible, get a pre-approval or pre-qualification, as in many instances these result in a soft rather than hard credit pull. Soft pulls don’t affect your credit score You don’t want to risk lowering your score for a denied application. You should also refrain from applying for several credit cards within a short time frame, or before taking out a large loan like a mortgage.
6. Be patient. You won’t drastically improve your credit score overnight. The best way to achieve an excellent score is to develop good long-term credit habits. According to Ulzheimer, two influential factors that go into your score are the average age of information and the oldest account on your report. “You’re really going to need to have credit for a couple of decades before you max out those categories,” Ulzheimer says. “It takes a really, really long time to improve a bad score and it takes a really short amount of time to trash a good score.” Establish good habits, like paying your balances on time, keeping a low utilization rate, and applying for credit only when you need it, and you should see those practices reflected in your score over time.
7. Monitor your credit. When you view your own credit, a soft inquiry is pulled, which doesn’t affect your credit the way hard inquiries do. Monitoring your score’s fluctuations every few months can help you understand how well you’re managing your credit and whether you should make any changes. However, you shouldn’t base any financial decision you make solely on your credit score.
The good news is that a higher credit score can help you qualify for a lower rate when you apply for a new line of credit — or refinance an existing loan. A lower score can also bring down the amount of money you're on the hook for with your monthly payments, which frees up cash that can be put into your savings account or used for other expenses.
Increasing your credit score takes work and patience. If you aren't sure how to start, the following steps will get you on the right track.
1. Pay your bills on time. According to Experian, payment history is the most influential factor for both your FICO and VantageScore. From a lender’s perspective, an established history of timely payments is a good indicator you’ll handle future debts responsibly, too. “You want to avoid things like late payments, defaults, repossessions, foreclosures, and third- party collections,” says John Ulzheimer, credit expert, formerly of FICO and Equifax. “And filing bankruptcy is a horrible idea. Anything that would indicate non-performance of a liability is going to harm your credit score.”
2. Keep your credit utilization rate low. Weigh your balances relative to your credit limit to ensure you’re not using too much available credit, a practice that can indicate risk. Ulzheimer recommends trying to maintain a utilization rate of 10%. “The higher that ratio, the fewer points you’re going to earn in that category and your scores are absolutely going to suffer,” he says. “In fact, people who have the highest average FICO scores have a utilization of 7%.” Ulzheimer points out that FICO’s scoring systems don’t differentiate between those who pay in full each month and those who carry a balance. Your utilization rate at the time your issuer reports is what's used for your score.
3. Leave old accounts open. Once you finally get rid of student debt or pay off your auto loan, you may be impatient to get any trace of it wiped from your report. But as long as your payments were timely and complete, those debt records may actually help your credit score. The same is true for your credit card accounts. Closing a credit card account can actually lower your credit score, as you will now have a lower maximum credit limit. If you’re still carrying balances on other cards or loans, your utilization ratio will go up. You’re better off keeping the card with a $0 balance.
4. Take advantage of score-boosting programs. The number of accounts and the average age of your accounts are both important factors in your credit score, which can leave those with limited credit history at a disadvantage. Experian Boost is a program that allow consumers to boost a thin credit profile with other financial information by adding online banking, telecommunications and utility payment histories to your report.
5. Only apply for credit you need. Every time you apply for a new line of credit, a hard inquiry is pulled on your report. This type of inquiry lowers your score temporarily. Applying just to see if you get approved or because you received a pre-qualified offer of credit is not a good idea. If it’s a single hard credit pull, the drop will be slight. However, a string of hard inquiries could signal to lenders that you are taking on too much debt. The effects of a hard credit pull on your score, according to a representative of TransUnion, can last up to 12 months. If possible, get a pre-approval or pre-qualification, as in many instances these result in a soft rather than hard credit pull. Soft pulls don’t affect your credit score You don’t want to risk lowering your score for a denied application. You should also refrain from applying for several credit cards within a short time frame, or before taking out a large loan like a mortgage.
6. Be patient. You won’t drastically improve your credit score overnight. The best way to achieve an excellent score is to develop good long-term credit habits. According to Ulzheimer, two influential factors that go into your score are the average age of information and the oldest account on your report. “You’re really going to need to have credit for a couple of decades before you max out those categories,” Ulzheimer says. “It takes a really, really long time to improve a bad score and it takes a really short amount of time to trash a good score.” Establish good habits, like paying your balances on time, keeping a low utilization rate, and applying for credit only when you need it, and you should see those practices reflected in your score over time.
7. Monitor your credit. When you view your own credit, a soft inquiry is pulled, which doesn’t affect your credit the way hard inquiries do. Monitoring your score’s fluctuations every few months can help you understand how well you’re managing your credit and whether you should make any changes. However, you shouldn’t base any financial decision you make solely on your credit score.
One of the most important areas around improving your personal finances is enhancing your money thoughts. Your thoughts around finances have gotten you to your current status and will require a new way of thinking and acting upon those new thoughts to improve things. A few things you could do is:
1. Start thinking about your goals and how your current actions will help or delay you attaining them. This could be as simple as starting to reduce spending in an area for a couple of months and using that money to reduce debt/increase savings.
2. Have a plan for your money and don’t buy things just because they are on sale.3. Surround yourself with like-minded people (Iron sharpen Iron), educate family and friends on how your new financial knowledge is impacting your life.
4. Try not to use credit cards to acquire things.
5. Save first and spend second...Make saving a non-negotiable.
5. Save first and spend second...Make saving a non-negotiable.
6. What are some financial goals that you would like to achieve in the next 12 months, 3-years, 5-years, etc. Write them down and identify a plan for achieving them.
7. Increase your knowledge around how to manage your money to achieve your goals (i.e. use a budget, eliminate debt, increase savings/investing, etc.)
8. Identify ways to reduce your debt and increase your savings.
7. Increase your knowledge around how to manage your money to achieve your goals (i.e. use a budget, eliminate debt, increase savings/investing, etc.)
8. Identify ways to reduce your debt and increase your savings.
9. Review your plan on a regular basis (i.e. monthly or quarterly) and identify an accountability partner who will ensure you do what you say you will do.
10. Stay the course and don’t give in to your OLD way of thinking.
10. Stay the course and don’t give in to your OLD way of thinking.
If you have questions or need help getting better at managing your money, reach out for a FREE discovery call to see how I can help.
In today's digital age, thieves are becoming increasingly creative with identity theft, particularly by targeting cell phone users. They employ tactics such as sending malicious links via text messages and impersonating agencies like the IRS on phone calls to extract personal credentials. Combined with frequent data breaches at companies, these scams can result in unauthorized accounts and fraudulent tax refund filings under your name.
With so many sophisticated methods utilized by scammers, it's crucial to stay vigilant about safeguarding your personal information. Enhanced protection measures include not clicking on unknown text message links, implementing two-factor authentication, and utilizing biometric security features. Additional steps involve creating strong passwords, regularly monitoring credit reports, disputing inaccuracies, and placing fraud alerts or credit freezes with major credit bureaus.
By adopting these protective strategies, you can significantly reduce the risk of falling victim to identity theft and ensure your personal and financial information remains secure. Stay proactive and informed to navigate the continuous threats posed by modern-day scammers.
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