Now here is something we don't hear often; ways to check your credit score. As a young adult, I have to admit checking my credit score was never on the forefront of my mind until recently. I remember seeing a book by Suze Orman's one day while I was at Barnes and Noble: The Money Book for the Young Fabulous & Broke. Being young, fabulous, and extremely broke (thanks to my student loans) this book was something I could relate to, so of course I got it.
Let me preface this conversation by saying I am by no means a credit expert, but I do love to read about things I can do now to set myself up for a wealthy state of mind.
In effort to spread the knowledge I gained from reading Orman’s book I decided to highlight a few key components from the credit score chapter:
1. Be sure to check your credit reports at least once a year to make sure there are no mistakes that could make your FICO score lower (Sidenote: a FICO score is the gold standard of credit scores, developed by Fair Isaac Corporation). You can check your credit score using the big three credit bureaus: Equifax, Experian, and TransUnion. You are entitled ONE free credit report a year.
Fair Isaac uses a formula to come up with a score for you that can range from 300 (very bad) to 850 (excellent). This score is based on the following:
35% from your past payment history
30% Total balance on your credit cards and other loans compared to your total credit limit.
15% Length of credit history
10% New account and recent applications for credit
10% Mix of credit cards and loans
2. Once you check your credit score it is recommended to correct your credit report (If there are any errors found). You can file a dispute with any of the three-credit bureaus. As a reminder the three credit bureaus mentioned above.
3. Get your FICO Score: After you have your credit reports and have checked any mistakes, you should then check your FICO score.
- ALWAYS pay your bills on time (even if it is just the minimum balance).
- Never cancel credit cards as a way to improve your score, this may actually cause your score to drop. Instead, cut your card up to prevent the urge of using it. This will allow you to keep your history with your card (especially if you've had your card for a minute-- having an extended history with a card looks good when the credit bureaus check your credit).
To go more in depth about ways to improve your financial peace of mind and your credit score woes, I highly recommend Suze Orman's book. It is by far one of the best investments your can make and only cost $9.00 on amazon.com