CHAPTER 2 WHAT IS MY CREDIT SCORE?

Chapter 1:

Travel Hacking

Annualcreditreport.com is a free website that allows you to review credit scores from all three bureaus every 12 months. Those initial scores give you the insight areas of opportunity for improving your scores. Listen, you CAN improve your credit scores! Work on one indiscretion at a time until everything has been processed and cleared. Here is a freebie. While talking to the collection agencies or companies requesting payments, ask them to send a confirmation letter stating you have paid your balance in full. If necessary, this letter will serve as proof that you have settled all debts with this company. Once financial stability has been achieved, you can begin applying for credit cards to fund your vacations! This e-book is not suggesting for you to apply for several credit cards without being financially responsible. In addition to finances, it is important to have good credit scores before applying for those bonus rewards credit cards. Since we are talking about credit let’s take it a step further.

Chapter 2:

What is my credit score?

Credit scores are used by lenders to determine credit risk and gives insight on your ability to pay for purchases. These scores are provided by Experian, Transunion, and Equifax. You credit scores range between 300-850 and is determined by several factors. Fair credit score ranges between 620-679, good ranges between 680-739, and excellent range is 740-850. These factors include your payment history (35%), credit utilization (30%), length of credit history (15%), new credit inquiry (10%), and credit mix (10%). As you can tell from the above percentages, payment history and credit utilization are very important in relation to your credit scores.

Late payments can really cause serious harm to your credit. These late payments are reported to the three credit bureaus causing temporary blemishes on the credit report. The amount of debt you have as it relates to credit limits or credit utilization is very important. It is not wise to use most of your available credit (greater than 30% of overall credit) without making substantial payments. This shows you may not have the funds to pay off your debts in a timely manner. Length of credit history determines when you opened your first credit card account. The longer the length of credit history the better. New credit inquiries are considered soft or hard inquiries. For our purposes, we are here to discuss hard inquiries. It may sound scary, but these inquiries are necessary to notify the credit bureaus of your desire for a new card and to check and see if you are in good financial standing. The great thing about hard inquiries is it temporarily impacts your credit score. Lastly is credit mix. This would include home loan, car loan, credit cards, etc. If all 5 of these categories are managed well, you can have an excellent credit score.

If you have a good credit score of at least a 710 or 720, credit card companies are willing to approve your credit card requests. Financial institutions are excited about giving you revolving credit to help with their profitability. These companies see credit cards as ways to earn interest off your minimum payments.