Everyday Cheapskate: Simple Strategies to Improve Your Credit Score
A credit score is a three-digit number between 300 and 850 generated by a mathematical algorithm (a mostly secret formula) based on information in your credit report, compared to information on tens of millions of other people. Like it or not, the resulting number is said to be a highly accurate prediction of how likely you are to pay your bills.
If it sounds boring and unimportant, you couldn't be more wrong. Credit scores are used extensively these days. If you rent an apartment, get braces, buy cellphone service, apply for a job or call to get utilities connected, there's a good chance your report and score will be critiqued to qualify.
If you have a credit card, the bank or issuer of that account is likely to regularly look at your credit score and payment history to decide whether to decrease your credit limit or charge you a higher interest rate.
The higher your score, the better you look to lenders. People with the highest scores get the lowest interest rates. And they're getting the jobs.
KNOW YOUR SCORE
You know you can get our credit reports for free at AnnualCreditReport.com. Now you can check your credit scores anytime, anywhere and never pay for them at the Credit Karma website. You will need to create a password-protected account, no credit card required. Plan to get hit up to buy all kinds of things and apply for all kinds of new credit. Just be strong: Get your free score, and move on.
HOW TO IMPROVE YOUR CREDIT SCORES
Current estimates are that you have at least 57 credit scores out there -- but only a handful of them are important to anyone. Most lenders look to your FICO score in their decision-making process. But even that is complicated because credit reporting agencies now have their own branded scores, which are based on the FICO model. So you might see that you have an Experian FICO score, for example.
If you want to look to the gold standard of credit scores, you want to track your FICO score. It is available to you for a few bucks at the website myFICO.
PAY YOUR BILLS ON TIME