If you want to get a loan for a car, a house, or anything else you want to purchase, you need to be aware of your credit score. If you’ve never looked at your credit score or thought about how to improve it, it might be time to start doing so.
How to Find out Your Credit Score
If you don’t know what your credit score is, it’s time to find out. Plenty of sites will offer you your credit report, but many of them make you pay for it. If you go to annualcreditreport.com, you can get a free glance at your score once a year. If your score is between 600 and 700, you’ve got decent credit. A good score is one that’s 700 or higher. While you’re looking at your credit report, make sure that there aren’t any delinquent accounts or mistakes, as those could be hurting your score without you even knowing it.
Lines of Credit
Having available lines of credit that you could tap in an emergency helps your score. However, opening a bunch of credit cards hurts you for a little bit because you haven’t yet proven that you’ll use your newfound access to wealth wisely. If you want to get a mortgage tomorrow, opening a new credit card today is not a good idea. If you want one someday, though, you might want to open a couple of no-fee credit cards, use them for your regular bills only, and pay them off each month. The key is to not allow the cards to change your spending habits and pay them off consistently. Your credit history improves without costing you any time, money, or much effort.
Just because you have some debt doesn’t necessarily mean you have bad credit. Student loans and mortgages won’t bring down your score much unless you become delinquent in your payments. Even credit card debt isn’t that bad, as long as you have much more available credit that you aren’t using (i.e. your total credit limit is double to triple the amount of debt). As long as you have a history of consistently paying on time and you have a large amount of available credit that you’re not using, your score should not be too affected by having debt.
Since the housing crisis, many people have had to deal with foreclosures on their credit reports. Foreclosures wreck your credit, and will do so for 7 years. After that, though, they fall off your report and you can get back to receiving loans, so while there’s nothing you can do about it until that time elapses, you should try to improve the other areas of your credit score. Keep making your other payments, allow your lines of credit to gain some history, and just wait it out until that foreclosure drops off and you suddenly have an awesome score.
Good credit allows you to borrow money more readily, in higher amounts, for less of your money. Lower interest rates on a mortgage can save you thousands of dollars, and all it takes is making choices that help your credit score. If you know what it takes to have good credit and you pay your bills regularly, you should eventually find yourself with an impressive score that opens those doors for you.