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:

1. Pay your bills on time-yes all your bills, not just your loans.
2. Keep your balances on cards below 50% of your limit.
3. Your score will be higher if you have different types of loans, not just all credit cards.
4. Avoid foreclosure
5. Avoid bankruptcy
6. Keep your number of cards to less than 5
7. Avoid applying for too many loans-yes even loans you decide not to take count against you if you apply for too many.
8. 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…