What’s your number? We aren’t talking about your phone number but your credit score. Your credit score number can determine if you are able to secure a mortgage or loan, and the interest rate associated with that loan, which can cost or save you thousands of dollars over time.
What does my credit score mean?
Your credit score tells the story of your credit, including the age, amount of credit available to you, and if you have any delinquencies. Many lenders look at your FICO score, which can range from 300 (lowest score) - 850 (highest score) points and represents a numerical value of your credit risk.
David Emmons, vice president and commercial lender at Rockland Trust, explains, “As a lender, we look at a person’s FICO score to gauge how that person has managed debt over time. History is often the best predictor of the future, and your credit score is a history of your borrowing and repayment."
The good news is that lenders won’t just take the credit score number at face value. Instead, they take into account all of the reasons behind your current credit score and weigh the factors that may have impacted your credit.
How do I improve my credit score?
As David says, “fixing your score is tough, but maintaining an adequate credit score can be easy.” But if you’re not on track, have no fear! Below are five tips for improving your credit score:
1.) Get credit as early as possible
No credit history can be as much of a problem as bad credit history, and you can’t have 20 years of good credit history if you never start. The age of your credit lines is an important factor in your score. There is no quick fix for waiting to establish credit.
PRO TIP: Don’t close that old card
Maybe you got your first credit card before heading off to college and now have rewards cards that you use more frequently. It is best keep that old card open and stashed in a drawer because the age of your oldest credit line impacts your score. When you are notified that the card is inactive and the account may be closed, use that card to buy a cup of coffee to keep it open.
2.) Monitor your credit score
There are many services out there to help you monitor your credit score. Free websites, such as Credit Karma, will show you your credit score and offer insights. Olta Agaj, a branch manager at Rockland Trust’s Westwood branch, also suggests looking into what your current credit card company offers in terms of credit monitoring. Some will include your credit score on your statement or through an app, for instance.
“Having good credit starts with being aware of your credit history and what is impacting your score. If you realize that you’re utilizing too much credit, you can prioritize paying your highest percentage credit cards first to reduce how much you’re using,” said Olta.
3.) Create a budget and stick to it
Good budgeting skills not only help you prioritize which debts to pay off, but can keep you from getting into too much debt in the first place. Tracking your purchases and spending behavior will help you understand where your money is going. The very first step in any purchase should be double checking that you can afford whatever it is, meaning can you pay off the card balance in cash tomorrow.
4.) Make payments on time
Payment history makes up 35 percent of your score. It seems like a no brainer, but making your payments on time is one of the best ways to improve your credit score. Be sure you are making at least the minimum payment on time. If you’re juggling balances on multiple cards, pay the minimum across your accounts and put excess money toward your highest interest card to get those debts under control.
Did you know that missed payments will stay on your credit report for seven years?
It’s important to avoid charge offs, foreclosure and short sales at all costs because they can haunt you for a long time. A charge off indicates to a lender that you did not repay the money you borrowed. If you went through collections and did not make a payment for six months, the credit company will write off that debt as a charge off, which stays on your credit report for seven years. Foreclosures, where the bank took possession of your property, and short sales, where the proceeds of the sale are less than the debt owed and the bank then writes off the difference, also remain on your credit report for seven years.
5.) Be cautious of deals that sound too good to be true
David advises that you “trust, but verify any company that says they can help you repair credit. While there are some services that claim they can fix your credit score in 30 days, you want to be skeptical because if it were truly that easy, everyone would do it all the time.”
Rockland Trust works with people just like you, who are at various stages of their lives. We are here to help you reach your financial goals, from owning your own home to saving enough to enjoy retirement. Check out our Learning Center for helpful advice about saving and budgeting, or stop by a branch to speak with one of our bankers about your goals.
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Use our debt payoff calculator to determine how much you owe and how long it will take you to pay off!
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