My long-time assistant, Roxie, is the master of managing her credit score. This began as a game to her and she wondered if she could ‘manage’ her way to a perfect ‘850’ score. Her Discover card provides (for free) her score each month so she began experimenting with changes to how she handled her finances to see how her score would be affected. After much trial and error, she managed her way to a perfect score, month-after-month. Here are her best tips:
- Don’t make late payments. Late payments are credit score killers- Here’s Roxie’s trick: Set up your payments as auto-drafts from your checking account and monitor to be sure all payments are made on time. Even one skipped payment can kill your score.
- Manage Credit Utilization. Keep your ‘credit utilization’ under 30%- If you have a $5,000 limit on your credit card, for example, you’ll want your total charges during any month to be below $1,500 (30%). Here’s Roxie’s trick: She may have charges exceeding the 30% target but she pays off her balance a couple of times during the month, rather than waiting for the end-of-month bill to arrive. This is as simple as going to her on-line credit card statement and paying directly from her on-line checking account…it only takes a couple of minutes!
- Open new accounts only when necessary. If you’re like many people, you receive a lot of credit offers in the mail…new credit cards, transfer-balance credit card offers, store charge offers or refinance offers. Here’s Roxie’s trick: Figure out how much credit you really need and once you have it, stick with it and resist the urge to open another account even if they offer ‘a 10% on your purchase to open a store charge card’.
Why a great credit score matters
Too often I assume it’s obvious why having a very good credit score matters. A lot of times, people think it’s the difference between getting a loan or not. Actually, it often means the difference between getting a great interest rate (and terms) versus a mediocre or poor rate.
Longevity of credit history matters, too
Roxie has years of credit history. If you don’t have a credit history or if you haven’t been using credit for long, this hurts your credit score. Consider going ahead and establishing credit though by signing up for a credit card or installment loan…then follow Roxie’s rules for getting a great score.
How to track your credit score
To track your credit score, get the free 5-Star app, CreditKarma.com. They’ll give you your current score for two of the three credit bureaus, TransUnion and Equifax. They can also suggest the best credit card for you based on your credit profile and much more. My score is ‘829’, and yes, I’m happy with that! Use these tips to win the Credit Score Lotto!