I'm in the process of tidying up my finances. Suze Orman's The Money Book for the Young, Fabulous and Broke has been a fantastic resource because it gives clear, straightforward advice in language I can understand.
Orman's first rule, and she is very insistent on this, is that you have to know your FICO score, also known as your credit rating. You probably know that this score is used to determine your eligibility for mortgages and car loans. According to the New York Times it is also often used by employers to decide if you are a good job candidate. So even if you're not shopping for a loan, it is a good idea to know your score.
BUT, before you check your score, you should check the information your score is based on--your credit reports. You actually need to look at 3 credit reports, one from each of the major agencies (Equifax, Experian, and TransUnion). But you only need to go to one website to get started. AnnualCreditReport.com allows you to obtain one free credit report from each of the agencies every year. Not sure if you've already gotten a report this year? Go to the Website and find out. It simply won't give you the option of getting a free report if you've already obtained one.
Get all 3 reports because they may differ. Then review the information on the reports. If anything is incorrect, you need to follow up and get it fixed. But don't panic if you see accounts from your teens that are still open. Those accounts are still providing you with a credit history, so you don't need to close them down. You mostly want to look for damaging information such as late payments. If the information is damaging but wrong, you need to get it corrected. If it's damaging but accurate, it's time to work on improving your credit.
If there are inaccuracies in your report, hold off on obtaining your FICO scores until the report has been corrected. You have to pay for the score, so you might as well wait until it is likely to be accurate.
When your credit reports are accurately telling the tale of your credit history, it's time to find out your FICO score. Go to MyFico.com to get your scores. These are not free. You can get your Equifax score for free as part of a 30-day free trial of a credit watch service. You get the score immediately and then regular updates on your credit report. Just make sure you cancel within the 30 days. You'll pay $15.95 apiece for the Experian and TransUnion reports. So for the price $32.90, and a little inconvenience, you can know all three of your FICO scores.
Your goal is to be at 760 or higher. If you're not there yet, here are the steps you can take to improve your score:
1. Increase your debt to credit ration by paying down your debt AND asking your credit cards to increase your limit.
2. Build good credit history by never missing a payment.
3. Hang on to your oldest credit accounts as long as possible, because they establish the longest history.
4. Avoid opening new lines of credit, but make sure you have one good low interest credit card you can rely on, and one retail card (Macy's for instance) to give you a good mix of credit. Space your applications out by a couple years. New applications hurt your score, but they are still worth it if you need to find the right credit situation.
What can you do now?
Read: Suze Orman's The Money Book for the Young Fabulous and Broke. Also check out her website and click on YF&B.
Get your credit reports and review them.
Get your FICO scores. If they're good, you'll feel great. If they're poor, you can start fixing them.
Orman's first rule, and she is very insistent on this, is that you have to know your FICO score, also known as your credit rating. You probably know that this score is used to determine your eligibility for mortgages and car loans. According to the New York Times it is also often used by employers to decide if you are a good job candidate. So even if you're not shopping for a loan, it is a good idea to know your score.
BUT, before you check your score, you should check the information your score is based on--your credit reports. You actually need to look at 3 credit reports, one from each of the major agencies (Equifax, Experian, and TransUnion). But you only need to go to one website to get started. AnnualCreditReport.com allows you to obtain one free credit report from each of the agencies every year. Not sure if you've already gotten a report this year? Go to the Website and find out. It simply won't give you the option of getting a free report if you've already obtained one.
Get all 3 reports because they may differ. Then review the information on the reports. If anything is incorrect, you need to follow up and get it fixed. But don't panic if you see accounts from your teens that are still open. Those accounts are still providing you with a credit history, so you don't need to close them down. You mostly want to look for damaging information such as late payments. If the information is damaging but wrong, you need to get it corrected. If it's damaging but accurate, it's time to work on improving your credit.
If there are inaccuracies in your report, hold off on obtaining your FICO scores until the report has been corrected. You have to pay for the score, so you might as well wait until it is likely to be accurate.
When your credit reports are accurately telling the tale of your credit history, it's time to find out your FICO score. Go to MyFico.com to get your scores. These are not free. You can get your Equifax score for free as part of a 30-day free trial of a credit watch service. You get the score immediately and then regular updates on your credit report. Just make sure you cancel within the 30 days. You'll pay $15.95 apiece for the Experian and TransUnion reports. So for the price $32.90, and a little inconvenience, you can know all three of your FICO scores.
Your goal is to be at 760 or higher. If you're not there yet, here are the steps you can take to improve your score:
1. Increase your debt to credit ration by paying down your debt AND asking your credit cards to increase your limit.
2. Build good credit history by never missing a payment.
3. Hang on to your oldest credit accounts as long as possible, because they establish the longest history.
4. Avoid opening new lines of credit, but make sure you have one good low interest credit card you can rely on, and one retail card (Macy's for instance) to give you a good mix of credit. Space your applications out by a couple years. New applications hurt your score, but they are still worth it if you need to find the right credit situation.
What can you do now?
Read: Suze Orman's The Money Book for the Young Fabulous and Broke. Also check out her website and click on YF&B.
Get your credit reports and review them.
Get your FICO scores. If they're good, you'll feel great. If they're poor, you can start fixing them.
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