It’s a fact of financial life that if you want to borrow money, your lender will look at information about your credit habits before deciding how to price the loan.
If you’re a good risk, you won’t have to pay as much interest for the privilege of borrowing. If you’ve been a credit screw-up, expect a lender to charge you more. That’s only fair, not only to the lender but to other borrowers the lender serves. It wouldn’t be right to expect responsible borrowers to subsidize careless borrowers.
This is where your credit score comes in. It’s a three-digit grade for your credit behavior to date. It changes all the time, based on your improving or deteriorating credit habits.
Some of the ways you can damage your credit score are pretty clear, while others might surprise you.
No surprises here, but it’s worth reviewing habits that will trash your credit score:
Check your credit report from each of the three major credit reporting agencies once a year for free.
The antidotes to these problems are straightforward: Always pay all your bills on time. Make this easy by setting up automated minimum payments for your loans and credit cards. It might take longer to accomplish, but get your credit utilization to less than 25%.
Your payment history, combined with your total debt, accounts for two-thirds of your credit score, so these three big factors require serious attention.
Even if you clean up your payment act and pay down your total debt, you still can lose cred with other behaviors:
Always pay all your bills on time.
You know that your credit score influences what you pay for loans and credit cards and affects other significant slices of your life: Jobs, housing, and insurance rates.
A potential employer, landlord, or insurer could use information based on your credit history and score to decide whether to hire you, rent to you, or insure you.
You can check your credit report—the summary of your credit activity that generates your credit score—from each of the three major credit reporting agencies once a year for free. Always make your requests from the annualcreditreport.com website, the only site sanctioned by the Federal Trade Commission. Or, you can call 877-322-8228.
Make one request every four months in rotation among the three credit agencies so you can monitor your credit report year round.
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