Is Your Credit Score Affecting Your Quality of Life?

The American dream is usually characterized as working hard from the bottom up, making a good salary, buying a house, and having time to create and enjoy your family life. But the vision doesn’t always come together so neatly – despite strong buyer demand, the inventory of affordable, available starter homes is relatively low, and to secure a mortgage, you need a strong credit score (something that not all Americans have or understand).

Even in the face of this unfamiliarity, most people realize that your credit score is the main determining factor in whether you qualify for a loan, and what rate you’ll pay on that loan. However, your credit score has the power to affect your life in far more than just one area — it can make or break your vision of the American dream on all sides.

JOBS

Though not all employers will check your credit score before hiring you, and most employers won’t rule out a candidate just because they have a bad credit score, your credit score could have an impact on how you’re seen by prospective employers. If they run a report and see that you’ve had a checkered financial history, and realize you’ll be handling financial responsibilities in the office, they may believe you’re underqualified, and move onto other candidates.

The good news is employers aren’t always allowed to view your credit report. According to Credit Karma, “The short answer is no, credit bureaus do not share your credit score with employers. Subject to restrictions in state law, employers may, however, ask to see your credit report. When your information is requested, credit bureaus will send over a variation of your credit report meant specifically for employers.”

APARTMENT RENTALS

Similarly, your credit score affects housing in more ways than solely influencing your mortgage rates and availability. Landlords will frequently check prospective tenants’ credit scores before choosing whether to rent the apartment to them. Obviously, if a tenant has a history of missing payments, or being late with payments, they’re going to be secondary options to tenants with strong financial backgrounds.

BILLS AND PAYMENTS

Your credit score could even affect how you’re expected to pay for utilities — especially when moving to a new location. When turning on utilities for the first time, a utility company may require you to leave an upfront deposit. If you have a high credit score, they may waive that deposit, but they may charge you more if your credit score is especially low. According to the FTC, “Like other creditors, utility companies ask for information like your Social Security Number so they can check your credit history — particularly your utility payment history. A good credit history makes it easier for you to get services. A poor credit history can make it more difficult.”

RELATIONSHIPS

Your credit score can even affect the quality of your relationships. It’s no surprise that money and financial issues are the biggest causes of couples’ fights (and breakups). If your partner is fiscally responsible, but you’ve had a more questionable history, it could lead to bigger arguments. For example, will you be willing to buy a house together? Will your credit score negatively impact your joint mortgage rate? Will you be paying off your debt together? Even a little money-related stress can quickly escalate into a bigger problem.

HOW TO IMPROVE YOUR CREDIT SCORE

If you’re reading all of this and feeling nervous about your own credit score, take a deep breath. Even if your credit score isn’t as strong as you’d like it to be, there’s always time to revise and improve it. Your first step is to know what your credit score is – and thankfully, you can check it for free. Once you know your credit score, you can take the following steps to improve it (and along with it, the quality of your life):

  • Understand your weak points. First, understand why your credit score is where it is. Is it because you’ve accumulated a lot of credit card debt? Is it because you missed several payments? There are many reasons here, but almost all of them can be corrected with better habits in the future.
  • Avoid new credit or debt. Don’t apply for any new loans or credit cards, this could tank your score even harder. Instead, focus on the lines of credit you already have.
  • Pay all your bills on time. This is the most important factor to focus on – from here on out, make sure you pay all your bills in full and on time. If you need to create a strict budget to do it, then do it. Without a steady history of on-time payments, you won’t be able to lower your score.
  • Start paying off your debt. Finally, work to start paying off your debt. Consider moving to a lower-cost area, taking on a second job, and cutting any unnecessary expenses. You can even call your credit card companies to negotiate for a lower rate. Once your debt totals start decreasing, you’ll feel happier and more optimistic as well.

Unfortunately, there’s no quick fix for a bad credit score. It takes years to build an initial score, and months to years to make a significant change. You’ll have to be consistent and patient if you want to succeed, but as long as you stay committed to your financial future, it can be done.

Need a little help understanding your credit score or want to sit down with a First Financial representative to help with debt management strategies? Stop into your nearest branch location, email marketingbd@firstffcu.com, or call 732-312-1500 to schedule an appointment.

Learn to manage your credit and reduce debt with our easy guide.

Article Source: Anna Johansson for NBCnews.com

9 Things Consumers Don’t Understand About Credit Scores

creditscoreThree numbers can affect everything from securing a mortgage or loan, to how much interest you’ll pay when you’re approved for a house. And while they’re just three numbers – that typically range from 300 (very bad) to 850 (excellent) – there’s a lot of information and regulations behind them. But don’t worry, if a thing or two about your credit score has left you scratching your head, you’re not alone.

“Consumers look at their credit report and think, ‘I don’t understand it. I don’t know what it means,'” says Gerri Detweiler, director of consumer education for credit.com and host of Talk Credit Radio.

To clear up the confusion, several credit experts spoke at FinCon, a financial conference in St. Louis recently, and debunked misconceptions about credit scores. Here are 10 common things consumers tend to get wrong about their scores.

1. The credit bureaus Experian, TransUnion, and Equifax evaluate my credit score. The three bureaus generate credit reports, but they have nothing to do with judging your credit score or advising lenders whether to approve or deny an application. “The credit report does not rate your credit,” says Maxine Sweet, Experian’s vice president of public education. “It simply lays out the facts of your history.” So who determines what your credit score means? Companies such as FICO and VantageScore Solutions evaluate your credit risk level – what lenders use to decide how risky it is to give you a loan – based on your credit report. Separate scoring models have been developed to help businesses predict if a consumer will make payments as agreed, and the credit score is just one factor used in the model.

2. There’s only one type of credit score. There are actually many different scores. For example, FICO has several models with varying score ranges. “If you get your FICO score from one lender, that very likely won’t be the same score that you would get from another lender, even though they’re using the FICO model,” Sweet says. Consumers shouldn’t focus on the number, she adds. Instead, look at where your score falls on the risk model and what influences that risk. If a lender declines your application or charges you a higher fee because of your risk, it will disclose factors that are negatively impacting your risk, Sweet explains. “Those factors will tell you what behavior you will need to change to change your credit history,” she says.

3. When I close a credit card, the age of the card is no longer factored into my credit score. The only way you lose the benefit of a card’s age is if a bureau removes the account from a credit report, says John Ulzheimer, credit expert at CreditSesame.com. “As long as it’s still on a credit report, the credit scoring system still sees it, still sees how old it is and still considers the age in the scoring metric,” he says. Take Ulzheimer’s father as an example: He uses a Sears credit card he opened in 1976, which is the oldest account on his credit report. “The assumption is if he were to close that card, he would lose that decades-long history of that card and potentially lower his score. That’s not true,” Ulzheimer says. However, there is one caveat: The score would be lost after 10 years (see # 4 below).

4. A credit card stops aging the day I close it. Even when you close an account, the credit card still ages. For instance, if you close an American Express card today, the card will be one year older a year from now. And as explained above, you won’t lose the value of the card’s age. “Not only does it still count in your score, but it continues to age,” Ulzheimer says. However, a closed account will not remain on your credit report forever. The credit bureaus delete them from credit reports after 10 years, according to Sweet. There’s just one exception: “If the account is in a negative status, it will be deleted at seven years because we can only report negative account history for seven years,” she says.

5. I need to carry debt to build credit. To debunk this, Detweiler points to her friend who went through a divorce and lost his home in the process. He wanted to rebuild his credit so he got a secured credit card with a $500 limit. According to Detweiler, he only made the minimum payments because he thought it was good for his credit score to have debt. In reality, he hurt his credit by maxing out the card and carrying debt. As Detweiler says, her friend made a big mistake. “You can pay your balances in full and still build good credit,” she says.

6. Medical debt is treated differently on credit reports. Credit bureaus do not discriminate when it comes to medical payments. Typically, medical bills are not reported to a bureau unless the bills are sent to a collections agency. When that happens, “medical collections are the same as any other collections,” Detweiler says. “They are a serious negative. The more recent they are, the more it affects your score.”

7. A credit repair company can only remove inaccuracies to improve my score. While it’s true credit repair companies help you get inaccurate information corrected on your credit report, they can sometimes go one step further. “The real core competency of a credit repair company is to get stuff that’s negative removed from your credit report,” Ulzheimer says.

8. My utilization rate doesn’t matter. Utilization is an important measurement in the credit scoring system. “It can wildly change your score in a short period of time in either direction,” Ulzheimer says. He explains it as the percentage of the credit cards you’re using at any given time. To calculate your utilization percentage, divide your credit card balances by your total credit card limits and multiply by 100. “The higher that percentage, the fewer points you’re going to earn in that particular category, depending on the scoring system,” Ulzheimer says. “The lower the percentage, the better it will be for your score.” The credit score tracking website CreditKarma.com recommends that consumers shouldn’t exceed 30 percent.

9. I should avoid new store credit cards because they’ll hurt my score. You’ve likely been asked at checkout: “Would you like to open a store credit card and receive 20 percent off your purchase today?” For some consumers, it’s a good idea to say yes. “That’s a great way for many people who might not qualify for other kinds of cards to get a credit card,” Sweet says. A store credit card can help raise your credit limit, improve your utilization rate and boost your overall score. Of course, you shouldn’t sign up if you’ll be tempted to use the card every day, Sweet says, “but don’t just automatically assume it’s a bad thing before you open that account.”

*Written by Stephanie Steinburg of US News, click here to view the article source.