These 2 factors impact your credit scores. Yes, there’s more than 1 score.

by

When considering how to improve one’s credit score, it is important to understand what exactly a credit score is and why you need a good one.

Source: Credit Karma

Now that we know what a credit score is and why you need a good one, let’s turn our focus to the various types of credit scores there are and the multiple factors that make up each score.

There are Multiple Types of Credit Scores

Amongst the numerous types of credit scores, the most renowned scores come from TransUnion, Experian, and Equifax.  However, there are numerous others, such like EMPIRICA, NextGen, Beacon, and VantageScore.  The thought of consistently checking all of these scores can be quite overwhelming, especially because the scores might be different for each credit bureau you check.  So, here are a few reasons submitted by the editorial team at Credit Karma as to why credit scores might vary between the various credit bureaus out there:

  • “The scores are from different dates. Since your score can change at any time, it’s important to compare credit scores from the same date.
  • “The scores were calculated using different scoring models. We’ll get into this in the next section, but it’s important to know that there are many scoring models out there. When you compare scores among bureaus, make sure they are calculated using the same model. Even with the same model, your scores could vary because each bureau may store information or calculate the score a little differently.
  • “The information in your credit reports varies among credit bureaus. This actually isn’t uncommon. Some lenders report to all three credit bureaus, but others report to just two or one or none at all. The information in your credit reports may also be updated at different times at each bureau. In other words, one credit bureau may be missing an account or other information that either helps or hinders your score.”

Multiple Factors Influence a Credit Score

According to Amy Fontinelle of Investopedia, “Your credit score is roughly based on five factors, some of which are weighted more heavily than others:

  • “Types of credit in use: 10%
  • “New credit: 10%
  • “Length of credit history: 15%
  • “Amounts owed: 30%
  • “Payment history: 35%”

In order to understand how to make sure your credit score as high as it can be, it’s important to implement a handful of strategic tactics to sway credit bureaus to give you a higher score.  These tactics are rather easy and can be tracked by various apps that help you track your finances.  In order to learn how to improve your credit score, read my blog, titled, “5 Strategic Steps to Take to Substantially Raise Your Credit Score.”

5 Strategic Steps to Take to Substantially Raise Your Credit Score

by

As we can see in the below video, credit scores are essential to ensuring you can get loans in the future.  Without a good credit score, there is no way that banks will trust you to give you a loan of any kind.  You can tell them you’ll pay them back, just like a school student can say they are a straight-A-student, but without looking at the student’s grades, there is no substance to his/her claim.  A credit score gives banks the hard facts they need to say they can trust you with a loan.

Source: Credit Karma

Keeping a high credit score is paramount to a healthy and stable financial future.  Here are some ways you can improve that credit score, because every effort to this end counts!

Step 1

Before opening new credit card accounts, make sure to consider the below pros and cons of doing so and make sure your credit score is at a good enough place to handle opening a new line of credit.

Erica Hill Keller Williams Improve Credit Score

Source: John S Kiernan of WalletHub

Step 2

Sign up for and use about four credit cards throughout any given month.  John S Kiernan, Senior Writer & Editor and WalletHub, shares, “The average credit card user had 3.7 cards in 2014, according to Gallup, and WalletHub’s editors believe that around four cards is indeed the number that provides the most benefit without making life overly-complex.”

Step 3

Reduce spending beyond the recommended 30% of your line of credit each month by capitalizing on your credit cards’ rewards programs.  To capitalize off of your diverse credit card portfolio and further reduce the amount of spending you do on each credit card, meet with or talk to someone at the company that each credit card belongs to in order to figure out what rewards each card offers.  These rewards can change, depending on the type of purchase or time of the week, month, or year.  Keep a record of when various rewards come into play for each rewards card, and use that card when it is most financially beneficial for you.

Step 4

Get each of your credit card companies to send you an alert when you’ve almost used 30% of your line of credit each month.  Then, switch to the next credit card until you reach 30% of usage on that card, and so on and so forth.

Step 5

Pay off your credit card balance multiple times throughout a month.  One way to do this is to set a calendar reminder on your phone, tablet, laptop, or desktop to go off at the same time each week.  Oftentimes, this day of the week can be Sunday, when some people take time to prepare for the work week ahead.  For example, set a calendar event called, “Pay Credit Card Balances,” with two email reminders–one that sends you an email one day before the calendar event and one that sends you an email one hour before you scheduled yourself to pay your credit card balances.  This will keep this task on your mind each week without forcing you to remember it on your own.  Use this article to help you determine when to pay off your balances in a way that best affects your credit score.

Do you want to learn more about wealth management? Follow my blog at EricaHill.net!

Use This Organization’s Tools to Teach Your Children About Money

by

In my last post, I spoke about the importance of early financial education. I recently learned of a terrific organization, the National Financial Educators Council (NFEC), that focuses entirely on this topic. Here’s their mission statement: “The National Financial Educators Council (NFEC) is creating a world where people are informed to make qualified financial decisions that improve their lives. We provide financial education resources, promote advocacy campaigns, and help organizations build sustainable financial education programs.” I have to tell you, just reading those words gives me hope for the financial future of our children – and here’s why.

Erica Hill

Teaching your children money management skills early on will make them fiscally responsible adults.

In focusing on creating a standardized financial curriculum, NFEC is addressing a real and dangerous problem in our country: the absence of anything even closely resembling a financial education in our schools. Quite frankly, it’s unacceptable that we are still prioritizing esoteric and unnecessary knowledge, like micro-details of the average Bronze Age Mesopotamian’s diet, over important, real-life knowledge, like how to avoid accruing debt, how to write a resume, and how to create and follow a budget.

People wonder how the Financial Crisis of 2008 could have happened. To me, it’s quite obvious that this stock market crash was a direct result of the fact that most Americans knew next-to-nothing about how to responsibly manage their finances, or why it would be a terrible idea to do things like take out four mortgages on one house. If we want to prevent another financial crisis caused by the same national Achilles’ heel from happening, it is imperative that we start teaching our children the skills they’ll need to become fiscally responsible adults as early as possible. Based on my fervency about this subject, you can imagine how pleased I was to learn that NFEC’s curriculum starts at the pre-school level, when the organization advises that children should be taught basic concepts of numbers, time, money and income, value, market and exchange, choice, and social values.

If you’d like to learn more about the NFEC’s advised curriculum or the opportunities they provide for guided financial education, head over to their website at financialeducatorscouncil.org. Your children will thank you for it one day.