A credit score is used to indicate the risk posed by potential lenders, banks, landlords and insurance companies when entering into a financial transaction with you.
You can find your score at Equifax or TransUnion. I do this about once a year just to see where I stand and to be sure there is no inaccurate information in my file that could potentially hurt my credit score.
What is a Good (and Bad) Score?
Typically credit scores range from 300-900, with a higher score being better. A credit score can depend on many factors, and many people aren’t aware of the weighting of each factor.
What Affects Your Credit Score
Your credit score is affected by your payment history (35%), amount currently borrowed in relation to amount of credit available (30%), length of credit history (15%), credit inquiries (10%) and the types of debt you have (10%).
I received my first credit card when I was 16 with the sole purpose of increasing my credit score by holding it over time. We don’t usually have a large balance on our credit cards so our amount owing is kept low, we have always made payments on time and never missed a payment of any type, and I only view my credit score once per year just to check up on things.
How to Boost Your Credit Score
I spoke with a credit agent at Equifax and she gave me a few simple tips on boosting my credit score:
- Avoid using a P.O. Box. Apparently credit ratings companies screen for mail directed towards a P.O. Box and it shows up as a red flag. This isn’t an issue for us since we get our mail delivered to our house, but anyone with a P.O. Box may want to look at redirecting their mail to a physical address.
- Protect against identify theft. If your identity ever gets stolen, it can be a nasty battle to try to re-establish your credit rating. Take simple steps such as destroying your financial documents, never giving out personal financial information to strangers and protecting all your financial data. I recently lost some of my personal information (tax return) so I’ve been guarding against identity theft by placing alerts on my credit files with Transunion and Equifax.
- Negotiate with your creditors. Late debt payments can have a negative affect on a credit rating and should be avoided at all costs. Creditors are willing to work with you to ensure payments are made in a reasonable amount of time. Creditors want their money and communicating with them to make sure they’re paid will help to avoid a big credit hit.
- Do not hold multiple credit cards. I’m guilty of this one (we currently have 3), but apparently some people own more than 5. Multiple credit cards is a red flag in a creditor’s eyes and they see it as you not being responsible. Avoid opening too many credit cards, and spread them out over time.
- Check your credit report annually. You are entitled to review a copy of your credit report annually and have the right to report any discrepancies. Equifax and Transunion both have copies available on request.
Free Credit Score Estimate
For those who are curious about their score but don’t want to pay to see it, click here to get a free credit score estimator.
I checked mine using the free credit score estimator and then paid to see it – and both scores were less than 10 points apart.
What do you do to maintain your credit score?