Credit Score

Why Its Important & How To Make Yours Better

Dreaming of your own space, that you own? Before you fall in love with a listing, spend a little time with your credit report. Knowledge is power, and any improvements to your credit score will only make your home-buying experience smoother.

What exactly is a credit report?

Good credit is important because it’s one of the main areas that lenders examine when deciding whether or not they should offer you a loan, and if they do— what interest rate you qualify for. A lower interest rate will save you money, and a higher rate can cost you thousands in the long run.

When diving into the world of credit, you will come across terms like credit scoreand credit report. Here’s the low down on both.

Why do you need good credit?

Good credit is important because it’s one of the main areas that lenders examine when deciding whether or not they should offer you a loan, and if they do— what interest rate you qualify for. A lower interest rate will save you money, and a higher rate can cost you thousands in the long run.

When diving into the world of credit, you will come across terms like credit scoreand credit report. Here’s the low down on both.

Where and how to get your credit report for free

  1. After you get your free credit report give the whole thing a once over.
  2. Note the factors that are negatively impacting your report and focus on improving those areas.
  3. Be sure to note any mistakes on your credit report. If you see any loans listed that you know you didn’t take out, report them ASAP!To report mistakes, you will need to notify the credit reporting agency in writing. For more information on reporting a mistake (including a sample letter to use), visit this website from the Federal Trade Commission: https://www.consumer.ftc.gov/articles/0151-disputing-errors-credit-reports

Know your credit score and what it means

Your personal credit score indicates your creditworthiness or how likely you are to pay your bills on time. Once upon a time in the big-hair 1980’s, the Fair Isaac Corporation came up with a formula to analyze credit and created the first credit scores. This score is known as your FICO score and is an industry standard (although other similar formulas exist). It ranges from 300 to 850; the higher the score, the stronger your creditworthiness. Here is a breakdown of scores and generally how healthy they are considered. 

300-579Very Poor
580-669Fair
670-739Very Good
800-850Exceptional

It’s important to check your credit report for accuracy, as mistakes can be made. And that information is what directly impacts your FICO or credit score. Keep reading for more info on how to do this!

What to look for on your free credit report

  1. After you get your free credit report give the whole thing a once over.
  2. Note the factors that are negatively impacting your report and focus on improving those areas.
  3. Be sure to note any mistakes on your credit report. If you see any loans listed that you know you didn’t take out, report them ASAP!To report mistakes, you will need to notify the credit reporting agency in writing. For more information on reporting a mistake (including a sample letter to use), visit this website from the Federal Trade Commission: https://www.consumer.ftc.gov/articles/0151-disputing-errors-credit-reports

Tips to improve your credit score

You’ve gotten your report. Maybe your score is not so hot—here are some steps you can take right away to get that score up.

  • Toss those new credit card offers in the trash and don’t think twice about it. The length of your credit accounts andinquiries into your credit factor into your credit report and score. Opening a new account right before you need to bank on that number will not do you any favors.
  • Pay at least your minimum balance due and pay on time.Consider setting up automatic payments, signing up for email or text payment reminders, or using your calendar or smart phone to remind you to get those payments in.
  • Chip away at reducing balances.Give extra consideration to the cards with the highest interest rate, but remember to keep paying at least the minimum on time for all of your accounts. No extra amount paid is too small! You will see a difference!
  • Don’t max out your accounts.Just because it’s there, doesn’t mean you should use it. Your credit report will detail how big your line of credit is and how much of it you’re utilizing. Ex. Your credit card limit is $1,000 and your balance is $800. Your credit utilization is 80%. If you can pay that down to $300, you would only be at 30%. The lower you can keep this utilization percentage, the better.