Improve your credit score
Credit scores measure your credit worthiness, meaning how reliable you are as a borrower. Credit scores are simply a measure of how good your are at managing debt.
This is an unfortunate system because in essence you have to get into debt to have a good credit score, but this is the reality we live in and we have to deal with the cards that we have been dealt.
Having a good credit score is essential in order to be able to get a home loan or a car loan, and also to be able to get the lowest possible interest rates.
If you have a low credit score, here are some ways you can improve your credit score.
No more annual fees!
Being an avid reader of personal finance blogs/websites for the last year or two, I’v noticed that there are two schools of thought when it comes to credit cards. Those who say credit cards are pure evil and avoid them at all cost, and those who embrace credit cards and use them to play the rewards game.
I’m in neither of these camps.
I definitely don’t avoid using credit cards. Not because I don’t think they are dangerous – they certainly could be in the wrong hands – but because they are very convenient. I use credit cards more that I use cash. However, I only use credit cards when I know I have the cash to pay for whatever I buy.
For example. I budget $150 for groceries per month, but instead of paying cash when I go food shopping, I pay with my credit card. I know I can’t spend more than $150 because then I’ll go over budget. At the end of the month, I take the $150 that are in my bank and pay off the credit card.
This allows me to not have to carry cash all the time and also earn some rewards.
Now, I like earning rewards, but I don’t play the rewards game. The game where you sign up for 10 or 20 credit cards and spend X amount of dollars a month to get X number of points. I’m impressed by the people who are able to do this, but I’m just not one of these people.
I spend what’s in my budget and if I get rewards then cool, and if I don’t get rewards then also cool. I don’t try to manufacture spending to claim rewards… or maybe not yet.
Your Credit Score May Improve
A couple of weeks ago, we read about how one-third of Americans have had debt in collections negatively affecting their credit score. Well, there’s some good news. FICO, formerly known as Fair Issac Corp., just announced changes on how they calculate consumers’ credit scores.
On Thursday, FICO announced its new credit scoring model, FICO Score 9. The new model will bypass collection agency accounts that have been paid and it will make a clear distinction on the impact of medical and non-medical collection agency accounts.