Your Credit Score Is Important. Make Sure You Know Yours

Over 30 years ago, my wife Casey and I bought our first house. When we applied for the mortgage, I found out that I had a utility bill from a college apartment that had been sent to collections. That one issue nearly stopped us from getting our house. It is very important to stay on top of your credit and to know your credit score. Thankfully, that has never been easier.
Your credit score hinges on many factors, including payment history, amount of credit, credit usage and even lack of credit. The first step is to get your credit scores from the three national credit bureaus and then work to improve a low score or maintain a good one.
Understand your credit score. The credit score commonly used by lenders and creditors is FICO. The FICO score range is 300 to 850, and a good score would be 700. You may have to pay a small fee to each of the three credit bureaus (Equifax, Experian and Transunion) to get their versions of your FICO score. The scores reflect your credit history and current financial status.
Make sure your credit reports are accurate. A credit report is a detailed report of your credit history. Errors on your credit reports can hurt your FICO score. You can get free copies of all three credit reports from annualcreditreport.com. Review all of them carefully. Although most of the information should be the same, there may be some small discrepancies among them.
Contact the credit bureaus to report any mistakes. They must respond to your submissions and take reasonable steps to correct errors.
If you are new to the credit market, you might have to establish your credit score. You can do this several ways. You can become an authorized user of someone else’s credit card or get a secured credit card - a card with a small credit line that is backed by money in your bank account. You can also take out a credit-builder loan from your bank or credit union, where the loan amount is held until you pay off the loan, thus building your credit.
Make yourself more creditworthy. Start by reducing your debt on the highest interest credit cards. Pay your bills on (or ahead of) time and pay more than the minimum amount. If possible, try to get your monthly debt payments below 20% of your monthly income. Only borrow what you need and discipline your spending habits. Establish an emergency fund instead of relying on credit cards for unexpected expenses.
Better credit means a better lifestyle. When you use credit responsibly, you create opportunities to improve your lifestyle without jeopardizing your financial health. Access to low cost credit may be within reach, so get started today.
Are bad credit habits slowing your wealth-building momentum? Check where you stand today and gauge the potential positive impact that can come from paying yourself first and adjusting the way you invest. Some credit reporting websites have calculators that show you the impact of changes you might make, like paying all your bills on time or paying off a loan. You can take action to help improve your future.
Don’t get blindsided like I did 30 years ago. Check your credit report, know your credit score and stay on top of both. You will be glad you did.
Important Disclosure:
Mike Bergen is a Partner, Managing Director at Beacon Pointe Advisors LLC. The information contained in this article is for general informational purposes only. Opinions referenced are as of the publication date and may be modified due to changes in the market or economic conditions and may not necessarily come to pass. Past performance is not a guarantee of future results. Beacon Pointe has exercised all reasonable professional care in preparing this information. The information has been obtained from sources we believe to be reliable; however, Beacon Pointe has not independently verified or attested to the accuracy or authenticity of the information. The discussions, outlook and viewpoints featured are not intended to be investment advice and do not consider specific investment objectives or risk tolerance you may have. All investments involve risks, including the loss of principal. Consult your financial professional for guidance specific to your circumstances.