Does the thought of checking your credit score give you anxiety? If so, take a deep breath. This final installment of Titanium life’s six-part series on building financial wealth is designed to help you fix your credit score.
The Credit Card Ranking System
The first step to fix your credit score is to understand how the ranking system works. There are three credit bureaus:
Each has their own score that will vary slightly from the others. These scores range from 309 to 893. The higher the score, the better your credit. Here is a breakdown of what constitutes bad and good credit.
309-599: Bad Credit
Those in this range run into trouble trying to secure loans. 24 percent of Americans have credit scores in this range.
600-699: Average Credit
Those in this range can qualify for most financing, but the terms are typically unfavorable. 21 percent of Americans have average credit.
700-749: Good Credit
If you range in the 700’s, then you can qualify for good credit cards at solid rates. You can also get loans without a hassle. 14 percent of Americans have good credit.
750+: Outstanding Credit
If you fall in this range, the world is your financial oyster. You’ll get the best credit cards, loans, and interest rates. Believe it or not, 41 percent of Americans have outstanding credit.
What Damages my Credit Score?
Each of the three credit bureaus use slightly different factors to calculate your score. The following factors are what affects your credit score the most. You have to know these factors before you fix your credit score.
The first is carrying a balance of more than 50 percent of your available credit. If you quickly get close to your max limit but only pay the minimum payment each month, creditors look at this overextension and worry about your ability to pay it all back.
My trick is to treat my credit cards as full when they are at 50 percent of their limit. I also limit credit card use to emergencies.
Late and missed payments are another behavior that kills your credit score. Whatever you do, don’t skip payments. You have to cut whatever expenses necessary to at least make your minimum payments every month. Knowing your financial limits is the key to good credit.
Something as small as too many credit inquiries can also negatively affect your score. This is particularly important for those applying for a mortgage. Credit Karma is a good free site you can use to get an estimate of your credit scores without requesting a hard inquiry.
Dealing With Inaccuracies on Your Credit Report
Potential inaccuracies are the one big reason you want to check your credit regularly. You may have things affecting your credit that don’t belong there.
The good news is you can dispute an inaccuracy with the corresponding credit bureau. The standard dispute form is free, but each credit bureau has a membership service that provides access to a simplified online dispute portal.
When you fill out a dispute, the company making the claim has 30 days to respond with evidence. If they can’t provide evidence or fail to respond within the time limit, then the claim is scrubbed from your credit report. If it is real, then make a plan to pay it off as soon as possible.
Make it a habit to check your credit score once every 30 days. Each month you practice good credit habits, you’ll score will get higher. Challenge yourself to be one of the 41 percent of Americans with outstanding credit.
Do you want to fix your credit score and get on the fast track to outstanding credit? Schedule a financial coaching session with Arman today.