A Number that Can Change Your Life - Your Credit Score!

You have great credit, you say? When was the last time you checked? At a minimum, you should check once a year. In fact, the Federal Trade Commission gives us a chance to do this free, once a year by going to ANNUALCREDITREPORT.COM from Equifax, TransUnion, and Experian. The only thing it won't give you is your credit score; nevertheless, you can still get it for around $10. Here is why it is important to monitor your credit score.

An Analysis of a Credit Score

Let's say today is July 2008 and you maxed out your card but you have no late or missed monthly payments on your credit card - Your score is around 630.

Two years later, it's July, 2010, and you pay all the debt and have no late payments - congratulations, you just scored around 730.

Four months later, you had a shopping spree at the mall and included in that shopping spree, you made a separate purchase at Macy's for some designer jeans. Your monthly credit card bill comes in and you don't see the transaction. You might think you got lucky with that charge - and you got a free pair of jeans. But what happened was that Macy's posted it on someone else's account and of course they didn't pay it. So now, it's late. They posted on your credit account as a late payment because they didn't get your payment. It's not your fault because you didn't see the charge. In the meantime, down goes your credit to 680.

It's now a few months later, and you realized the error to that purchase. You contact Macy's and they correct it - back up to 730 you go.

You get the picture now why you should check your credit score once a year?

How Do I Increase my Credit Score?

First if something is in error, contact all the credit bureaus involved with that error. One transaction doesn't always hit all the credit bureaus, but you should check them all out. They have 30 days to respond. It is always best to send your notifications by certified mail.

35% under the FICO system is derived from how well you pay your bills - so pay on time! I have all my bills on automatic payment. They won't take it out sooner than you want. You can set it on the due date.

Too much debt will lower your credit score. A rule of thumb is to add your total available credit and multiply that by 30%. That should be your line in the sand not to go over.

The bottom line to managing your credit is to have discipline and use it wisely. Sometimes, there are circumstances beyond our control - loss of job, medical bills, divorce, etc. Just be careful of credit repair scams. Many will contact you when you have bad credit.

Source: USAA Insurance Group