Your credit score can have big implications. It can affect how much you’re able to borrow, what interest rates you are offered, and even whether you can get an apartment or a job. In this podcast, we explain the parts of a credit score and talk about the strategies that might help you increase it.
elcome to another edition of our CredAbility [now Clearpoint Credit Counseling Solutions] Podcast along with your host, Mechel Glass. Here is Steve Moore to begin today’s conversation on understanding and managing your credit score. Steve: Mechel, I’m so glad you stopped by today because I have lots of questions about this. Credit scoring, my credit score, my credit rating, kind of confusing, so clear up some questions for me. What is my credit score? How do I come about it? And where do I find it?
Mechel: Those are great questions and a lot of people are confused about what is a credit score and why is this preventing me from getting what I want? Well, a credit score is a three digit number that lenders will use and employers will often use to kind of rate you financially to see how you’ve handled your personal finances in the past. So it basically gives them a picture of how stable you are financially. It’s basically all it is. Steve: Okay, there are three main companies that do this, right?
Mechel: Yes, you can get your credit report and a credit score from Equifax, Experian, and TransUnion. Steve: All right. And are these free?
Mechel: Well, the credit score is not free. But the credit report you can get that for free once a year from each of the credit bureaus. Steve: All right. What’s a good score?
Where do these scores range?
Mechel: Well, the scores range from 300 to 850. A good score would be anything that’s higher than, let’s say, around the 700 range. That’s a good score. Traditionally, if you’re trying to buy a home, banks they’ll pull all three and they will traditionally take the middle score. If it has been higher than, let’s say, a 650, then usually people have been able to get loans. But in light of our climate today and what things have been happening, banks are looking at scores that are 720 and higher. Steve: Ah okay. What if my score is lower than I want it to be or lower than it should be? What can I do to improve that?
Mechel: That’s a great question and it’s a question that I hope that many people will ask before they start to buy something like a home or a car. There are two things that you can do to raise your score very, very quickly. The first way is to pay down your debts, and then the second way is to make sure that you make your payments on time each month. Those are two ways that you can improve your score very quickly if you’re trying to improve it. Steve: And if my score is low and I start doing all the right things, how long will it take for me to see some results?
Mechel: It just depends. The credit bureaus use a type of algorithm and everybody’s credit score is different and everybody has different types of credit. One person could have a credit report that shows five credit cards where another person has a credit report that shows a mortgage loan, a car loan, a student loan, a credit card. So they have a different mix. And let’s say that they are the same age. They make the same amount of money. The person with the different mix could have a higher score because one of the factors is the type of credit. So again, it depends. The time limit will depend upon the type of credit that you have, and it will also depend upon that person how well they are able to pay down their debts. Steve: If I check my credit score or my credit report which gives me my credit score. If I check and find some erroneous information there, how can I get that changed?
Mechel: There’s a form that you can fill out to dispute information that is on your credit report that is not correct. And you want to make sure that you follow all of their guidelines to dispute information that’s not correct and get that information remedied. If you’re finding yourself having trouble, then what you can do is call the creditor and talk with them as well and say this is not correct, give them the evidence that is not correct and then they will report that information to the credit bureaus. Steve: Okay. Suppose I don’t live on credit. I’m not planning to buy a car. I’m not planning to buy a house. Should I even care what my credit score is?
Mechel: Well, if you’re not living on credit then that’s a great thing. And no, you don’t have to care about it. But there is one area where you might want to care about your credit score and that is if you try to get a job. A lot of employers are checking your credit score before they even interview you. Steve: Now why would that be? Why would a prospective employer want to check my credit score?
Mechel: if you’ve handled your personal finances good in the past, then you’ll handle that company’s personal finances in a great way as well. So it’s another factor that they use to find the best candidate. If you apply for the job and then they ask you can we pull your credit history and you say “No”, you probably won’t get an interview. So you should care about your credit score. Steve: Good point. Mechel: Another important reason why you should care about your credit score even if you’re not getting credit is that when you apply, let’s say, that you move to a new apartment building. Many times when you apply for services, the utility companies will want to pull your credit score as well. So it’s important to know what that number is and to get it where you want it. Steve: Yeah, so probably it’s a good idea then to check, at least, once a year to make sure?
Mechel: Absolutely. Check it once a year. There are a lot of programs out there that you can check it once a month if you want. I wouldn’t say check it once a month, you know, again it costs some money to get that score but once a year is fine. Steve: Mechel, thanks. Mechel: Thank you.