Credit Score
Do you worship at the “Sacred Church of FICO”? Do you bow down to your credit score maker?
I hope not, but it certainly seems that way at times. Google keywords says there were almost 2 million searches for “credit score” in March alone.
Dave Ramsey says, don’t worry about building your score-that the score only tells you how good you are at borrowing money….
But is it that simplistic?
Why you need a good credit score:
- A new job-many companies pull a credit report when you apply
- Buying a house-your report is used to approve/disapprove-but also affects the rate of your mortgage
- Credit cards-the higher your score, the lower your rate-of course the inverse is true too!!! (I do agree with Dave that carrying a balance is stupid!)
- Renting a home or apartment-most landlords pull a report now.
- Lower insurance rates-homeowners and car insurance rates can be affected by a low score.
So the difference between having a good score and a bad one can mean tens of thousands of dollars in interest payments over the life of a mortgage. Also whether or not you get that job, the apartment or home you have set your sights on. And can make your monthly bills higher if you have to pay higher rates for your car or homeowners insurance policy.
So now you understand why your credit score is important, what can you do about it?
Improving your credit score:
- Pay your bills on time-yes all your bills, not just your loans.
- Keep your balances on cards below 50% of your limit.
- Your score will be higher if you have different types of loans, not just all credit cards.
- Avoid foreclosure
- Avoid bankruptcy
- Keep your number of cards to less than 5
- Avoid applying for too many loans-yes even loans you decide not to take count against you if you apply for too many.
- Have a tickler system at home-to be sure you do number 1-paying your bills on time.
Now you may say-avoiding bankruptcy and foreclosure are so obvious, why include them. Many folks are underwater on their mortgage and struggling to get by.
It may be tempting to just walk away- and not deal with the problems. However those decisions can stay with you for more than 7 years, before you can repair your damaged score.
Just a few more reasons to keep working your way through your debt problems (or better yet avoid them!!!!).
Now for more information about obtaining your credit score, check out this post from the past.
And for those of you who are ready to dispose of your credit cards, I recommend cutting them up with bandage scissors-you nurses should have those in your scrub pocket- right….
Check out this video for a unique way of destroying his card- in the microwave. I don’t recommend this-those fumes are probably poisonous.
DON’T DO THIS AT HOME!!!!!
Let me know if you have any credit score comments or questions. Are you worshipping at the FICO altar????
My free mini-course on personal finance, which you can get along with my free E-book “Emergency Money Resuscitation” can be found here. The mini-course has several posts on credit card management…
Tags: credit score, improving your credit score, my fico score, ways to improve my credit score
Good post! I’m amazed at how many folks will simply not pay bills on time…this is so huge with the credit score. I like the tickler system as a reminder too!
I hate credit scores. For years mine has been excellent, but it’s lead me into debt. I would much rather have a crappy score and no debt. Everytime I hear or read the word FICO I think of Suze Orman and I get chills up my spine. I just want to say to her, WHO CARES. I’m sick of hearing about people needing a good credit score. If that is all that matters than why are there so many foreclosures and such? Oh well, nice points in your post.
I really do think the world would be better if we have no need for credit scores. But as long as they are being used, you have to pay a little attention to them. Until you build enough wealth that you don’t care.
That should be all our goals-and you are headed there. I love your passion!
You got me with the opening line. I never even think about my credit score. Probably people with good credit don’t very often.
Good advice for people who do worry about it.
It’s “altar”, not “alter”
Thanks for stopping by Wizard. Typo duly corrected! I must have been in an “alter”ed state!
I am a bit like Jeff, but hate is too strong of a word. Probably apathetic about my credit score is better… I just don’t think about it and don’t really care. Of the reasons you listed above (all quite good), the only one that affects us is insurance rates. We have no debt and do not borrow money so our credit score is just not something we concern ourselves with.
I appreciate the post and the balance between worshiping at the altar of FICO on one extreme and totally ignoring FICO on the other extreme. Well done.
Joe, thanks for the comments and for stopping by. I too hope to not care what my score is, but for many, unfortunately, it is still important.