3 things that affect your credit score
Many people don’t realize how important a good credit score can be. In fact, many people don’t realize how important having a good budget can be. These two things go hand in hand. If you are smart with your money, make your payments on time and don’t over stretch your budget, then you are more likely to have a higher credit score. There are three main things that really affect your credit score:
1. Missing or making late payments
It can be hard, especially if you are living on a tight budget to make hard choices when it comes to bills being paid or putting food on the table. I hear this all the time and it makes me wonder if the family is truly sacrificing when they have a full cable package, smart phones with data plans and a fancy car to drive. In my honest opinion, there is no sacrifice there, just pride.
If your family falls into financial hardship (and I feel like I can give you this advice because we have personally be through this), the last thing you want to do is let your bills go past due. If it comes down to it, call the company, explain what has happened and 95% of the time, they will be willing to work with you.
IF you don’t call them, they will send past due notices. While you might think that this isn’t a big deal, you will pay it when you can, it affects your credit score. Every time you miss a payment or are late on a payment, it is reported to the credit agency and affects your credit negatively.
The same goes for being on time with your payments. If you pay your bills on time, it raises your credit score.
It is a lot hard to raise the score back up, then it is to drop it. Its like working all year in school and getting A’s, then taking a final and getting a D. It will drop your grade big time. It took a year to get an A and only a few hours to get that D.
2. High Revolving Balances
Another thing that can affect your credit is having high revolving balances are the accounts that you have open. All that means is that you owe a lot of money to either credit card companies, on car loans, rv loans, etc. Any balance that you don’t pay off every month is called revolving. By keeping high balances on your loans, it not only increases your debt to income ratio, but it also keeps your hands tied. If you are using more than 80% of your total amount of available credit, it will start to negatively affect your credit score. (If you have a $1000 limit, and you are at $800, that is 80% of your available limit).
This means you are less likely to be approved for a new loan because you already have high balances. It also means that you will not be able to pay off your debt as quickly as your could be.
Don’t get yourself into the position where you have every dime from every paycheck spent before you get it. SELL or trade-in your high payment fancy car and get a used “beater” car that gets good gas mileage. Take it from me, you are really the only one who really cares what you drive. If someone laughs at you for having a beater car, laugh back at them for having a lot of debt.
Get rid of the expensive cell phone plans, high cable bills, excessive spending at the store. Cut back on everything where it can be cut and start getting the high balances paid off. It won’t take long to get yourself out of debt if you are dedicated and then you can start to enjoy the “luxury” things in life without suffering financially. You want to keep your balances at 25% or less to keep your credit in good standing.
3. Requesting new lines of credit to often
Every time you apply for a new credit card, see if you qualify for a car loan, and all those other things that request your credit information, it “hits” your credit score. If you are doing this to often this translates financial distress to the credit companies. In other words, you are applying for a lot of lines of credit because you can’t get approved for anything OR because you feel you need the credit because you can’t pay your bills.
Even if you never use the card you applied for, it will still affect your credit negatively if you are requesting a whole bunch at one time. If can be good for your credit to have zero balance cards/limits, but do them only every so often.
Do you know what your credit score is? You can check today for free without it affecting your credit, and even get free credit monitoring that will help you know what is going on with your credit. You can track your debt and see what progress you are making with getting it paid off. Everyone should know their credit score. Find out what yours is. This will help you improve your credit and know what is hurting your credit.