Credit scores worked very simply, it is about your borrowing and repayment history. Then an algorithm (yes, I am one of the math guys that came up with those) is used to calculate how much of a risk you might be to default on your loan. So, do not be late beyond 30 days, do not carry more than one credit card, do not have too much credit out to your income ratio, then you are good. Then, it all changed.
Thus, to have good credit in years past, like, five years ago was simple. Pay your bills on time, do not carry excess debt. Then the score will be over 750, especially if you own a home. But today, the classic means to assess one’s credit score has drastically changed. By who and why? Well, the credit industry. They want us addicted to credit; consequently, they retooled the scoring system (deleted my sane algorithms) to ignore, income, home, and auto loans, and put all the focus on credit cards. So, if you follow my great advice or the same from a guy named Dave or a lady named Susie, and if you checked your credit score lately, you will be shocked to see, 600’s!
What to do? Get a credit card or three!
This goes against what I have been teaching for over 30 years. Do not use credit cards. They lure you to buy what you do not need, they have loan shark interest rates, and they will destroy your savings, future, and retirement. Yet, to get good credit, they are now a necessary evil. And, you need good credit to rent an apartment, receive a low-interest car loan or mortgage, and sometimes even to get a job.
To get a good credit score, do not be late on your home or car loan and… Have three credit cards and keep them under 10% of their limits; preferably, use them and then pay them off. Do not get them all at once; rather, over 60 days apart. And that my friend is what will raise your Credit Score! https://www.creditkarma.com/credit-cards/low-interest
So, what I been teaching for 30 years, get used to using cash or debit cards and, DO NOT depend on credit is still true! However, get a credit card, use it, do not depend on it, pay it off, and of course do not be late. If you do not have a credit card or two or three, no more than three, this will give you a credit score in the 600’s! Ouch! Yes, parts of the banking industry are malevolent to responsible stewardship!
Here is what else you can do:
- Never make a late payment on any unsecured debt like credit cards.
- Be on time with your secure debt (car and home loans)!
- Decrease your credit utilization by increasing your credit limit, so they are not within 10% of their limits.
- If your credit cards are over the 10% of their limit, get a balance transfer to another credit card or a peer-to-peer loan.
- Use your cards and then pay them off within the billing period so they are not closed.
- If you do not qualify for a credit card, then get a secured credit card (you have corresponding funds deposited to cover it, see your bank, or credit union.)
- Check your credit score monthly to see if there are errors or items that are not yours! Click Free Score https://clickfreescore.com/ they can also give you access to reliable and low-interest credit cards.
- Set up an account with Credit Karma www.creditkarma.com to help you monitor and repair your credit.
- Set up a free Experian Boost™ www.experian.com/consumer-products/score-boost.html they can help you get a better credit score boost for making on-time payments for your phone and utility bills.
- Get out of Debt! https://biblicalstewardship.net/getting-out-of-debt/
- Handel your credit cards properly: https://biblicalstewardship.net/2020/01/15/how-to-handle-credit-cards/
STOP the overspending and get control of your budget and know where your money is going. Create and live with, bare-bones budget. In order to get out of debt, you first need to stop getting into debt.
- If your unsecured debt (credit cards and such) is under $15,000 go here: https://biblicalstewardship.net/getting-out-of-debt/
- If your unsecured debt is over $15,000 make a free and quick appointment, I have help for you: https://calendly.com/richardkrejcir
Dr. Richard Krejcir is a pastor and a licensed and experienced Financial Consultant with over thirty years of experience. He has worked for major banks, insurance companies, nonprofits, and families too. He is also an author, Special Ed Teacher, and financial blogger and holds a doctorate in Finance and Stewardship.