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Building A Good Credit Score

How often do you think about your credit score? How often do you check on it? Are you amongst the 27% of the population with a score between 750-799, in the “excellent” range? Or will your low credit score prevent you from getting a grade A loan or insurance rate?

Your credit score is a numeric representation of your creditworthiness. There are many factors that affect your credit score. There are long term considerations, such as when your oldest bank account or credit card was opened. Creditors will look at how consistently you made payments and if you routinely carry a balance. There are also events like bankruptcy that will quickly and drastically alter your credit score. All of these things considered, you have a credit score that will be called into question during your major life events.

Mortgage brokers, banks, insurance companies, loan issuers and landlords will examine a candidate’s credit score when determining whether that person is a financial risk. A high credit score makes it much easier to get a new apartment, negotiate for a better insurance rate, or have security deposits waived.

A poor credit score, on the other hand, makes all of the above more difficult. Two people may be applying for a loan to start a business. One candidate has a “very good” credit score, the other has a “fair” credit score. The candidate with the fair credit score will be given a loan with a much higher interest rate. When it comes to paying off the loan completely, a higher interest rate can bury the principal amount. It’s a financial pitfall that no one can afford to fall into, least of all those who are already living paycheck to paycheck.

How can you improve your credit score? First of all, eliminate any outstanding credit card balances. Second, keep an eye on the calendar. This will help you make bill payments on time, and help you stay aware of tax season. Third, check your credit report regularly. It’s difficult to make improvements when you don’t have a benchmark. Keeping an eye on your credit score will help you make financial decisions, and give you confidence as you see your score increasing. Knowing just where your credit score is will save you time and energy. It may not make sense to apply for a mortgage if your credit score is lower than optimal. Instead, you can focus your efforts on raising your score, then applying for a mortgage when the time is right.

Your credit score is one of the main factors that creditors, banks and landlords will judge you based on. It’s well worth your while to keep tabs on your credit score. It will help you make good financial decisions, and will put you in the driver’s seat when going through major life changes. Don’t sleep on your credit score! It’s in your power to make it great.

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Your home is your most valuable asset. It is probably the single largest investment you will make in your lifetime. Your home is more than a place to rest your head and raise a family. Your home contains equity. It is a treasured resource and in some cases, can even be used as an ATM (aka cash back mortgages and HELOCs – don’t worry we’ll get there).

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