Credit: Ways to improve and stay on top of your credit scores.
What is Credit?
Credit, what is it? We need it for everything, but how many of us understand how to obtain it, or even how it works? Credit is an important factor when it comes to making large purchases such as cars, homes, or even getting approved for apartments or smaller loans. There are several factors that go into the overall credit score an individual has. Credit is an equation with several factors and possible outcomes to come to a fluctuating score. The list of factors is as followed:
Mix of credit accounts- this makes up for 10% of your possible score and includes the variety of accounts to have. Cards, loans, homes, etc.
New credit accounts- another 10% of your credit is the amount of time between how often you are applying for accounts.
Length of credit history- 15% of your score is for the amount of time you’ve obtained certain loans.
Owed amounts- 30% is your total debt divided by your total credit limits.
History of payments- 35% this is where making on-time payments is important. The largest percentage comes from whether you are responsible in on-time payments.
Even though some factors carry much more weight than others, all are equally informant when you are just starting out with your credit, or are trying to repair it. You should work on each factor equally to gain success.
Can we raise our scores?
When we start our credit accounts or are a newbie to the world of credit, go slow! Going slow can really help with maintenance of scores in the beginning when you haven’t had the experience necessary to create a longstanding credit score. Don’t open too many accounts too quickly. Although we now have access to credit cards and loan offers, we can’t accept them all. We don’t want to look risky! We want to prove that we can have a couple solid accounts open and successful before we dive in deeper.
Another thing that is important to consider if we are trying re-establish our credit history is if we’ve had problems in the past which led to credit downfalls. No problem, however, because the good thing about credit is it can always go up! Only if you put the time and effort in, of course. Open new accounts slowly. Show that you are being responsible in your bill paying and show that you can successfully pay off debt.
Use free services to check your score! It doesn’t have to hurt your credit anymore to check your score. There are free services now which will assist and give advice based on your personal score and even give you a report card on how you’re doing! We’ll review these sites later in this blog.
We should also only be obtaining credit as needed. Do you really need that Macy’s credit card right now? No. Maybe when we are a little more established, but not right now. Let’s try getting a secured credit card, or a credit card with a lower limit first to help us re-build.
Good credit > No credit
We have to find our perfect credit mix based on what we need and what our credit limits are. We are all different and have different needs.
Free credit apps!
Credit Karma:
Credit Karma is hands down my favorite credit app. The tools to help manage your credit are free. The amount of access and information you receive on this site feels like you have a premium membership. You have credit monitoring available on this site which gives you real-time updates and notifications. This is especially helpful if a situation occurs when something unfamiliar to you shows on your credit; you can address it immediately. Suggestions, details, likelihood of approved credit, and recommendations are just a few features that makes Credit Karma outstanding.
Credit Sesame:
Credit Sesame we found to be another free credit score app for the most part. The monthly credit updates allow the big picture to be seen with ease. However, it doesn’t quite provide the same bells and whistles as Credit Karma. Although it lists key factors such as debt, balance, and accounts it is in fact limited.
Mint:
We loved using mint! Functionality at its finest. Mint tracks spending habits and gives you a clear breakdown of where your money is going. Everything is organized and categorized for you to adjust spending habits as needed. Mint breaks down your spending into a pie chart which is easy to read and really puts into perspective how much unnecessary spending we are actually doing. This is the app you’d want to explore if you are ready to budget, set goals, and get your spending under control.
Experian Boost:
Experian boost is the newest credit monitoring product to date. It allows you the opportunity to track all of your utility bills in order to help raise your score and improve your payment history. Putting these bills into the equation of your credit score adds more factors and accounts into the total calculation which gives better chances of an increased score.
This is a great opportunity for those who may not have many factors involved with their credit, but pay plenty of bills regularly. Boost links to your checking account and tracks the routine and time of your bills each month to determine if you would be a responsible borrower based on your bill paying habits. This is a great way to bounce back your scores if you are rebuilding.
Experian Boost- Is it worth it?
I recently started with Experian Boost, and while I love the idea of the product it does have some kinks that need to be worked out. For example, I have paid all my bills for the month of June but the app is only showing my Sprint bill. Now you can go and report the transactions they missed so they can update the information, but it requires you to copy and paste information from your checking account to the app. Being that the product is tied to your bank account it would be a simpler process to be able to just mark which transactions are your electric, water, or telecom bill and submit instead of having to open up your online banking, find the transactions and copy the information required. With my Sprint bill alone my score went up 1 point. While that isn’t a lot, it will add up over time, and what have I got to lose?
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