With bill alerts, even vacation won't cause a lapse in payments.
Credit scores aren't some mysterious label placed on consumers. They are determined by how well you manage your debt. Lenders and anyone else who might extend credit to you want to know that they will be repaid on time. Your scores reveal how you have paid in the past, which helps determine how you will most likely pay in the future.
If your credit scores aren't what they ought to be, or if you don't even know what yours is, there is plenty of hope and plenty of room for improvement. Raising a low score isn't easy, but the effort will make the rest of your life a lot easier.
Step One: Get a Copy of Your Credit Reports
The only way to know your credit score is to obtain copies of your credit report from all three agencies: Equifax, Trans Union, and Experian. Everyone is entitled to one free copy of their credit report every year, so there's no excuse for putting it off. If you're afraid of what your scores might be, that's the best reason of all to get a copy.
Go to Annualcreditreport.com to request your credit report from each agency. No company should ever charge to provide a copy of your credit report once per year. Use Annualcreditreport.com, and you won't have to worry about whether the organization is legitimate.
How Credit Scores are Calculated
Fair Isaac Corporation determines what is known as the FICO score, and it ranges from 300 to 850. The higher the score, the better your credit. The information used to determine your score is taken from your credit reports. At Trans Union and Experian, the FICO score is known as the FICO Risk Score Classic. Equifax uses the Beacon score name.
The different information in your credit report weighs in as its own percentage toward the overall score. My Fico explains that 35 percent of the score is based on payment history, and 30 percent is determined by how much debt you owe. Length of credit history determines 15 percent, new credit 10 percent, and types of credit used is also 10 percent.
Each spouse's credit report is separate, but joint accounts, both good and bad, can impact both.
Improving a Low Credit Score
If your score on each report isn't what you'd hoped, you're not alone. The good news is that every responsible choice that you make from here on out is a step toward improving your credit. My FICO suggests that one of the best ways to improve your score is by reducing the amount of debt that you owe. The Amounts Owed portion of your credit reports carries a lot of weight, so pay down debt and keep it down.
Look for new credit at one time, not all the time. FICO notices when there are credit inquiries that you didn't initiate, and they can count against your score. When several inquiries are made in a short time period and the result is one loan, FICO determines that you were only rate shopping, not making fruitless attempts to open several new lines of credit.
Of all the responsible measures that you can take toward improving your credit, paying every bill on time is the best, bar none. A good credit risk is someone who can handle the amount of debt that he has and make his payments on time.
Bill Alerts Can Help Improve Your Credit
A budget can help keep your finances in the black, and budget software such as Mint.com makes it easier. But bill alerts make sure you never forget about when a bill is due, and that speaks volumes about your responsibility and credit worthiness.
Mint.com's budget software can send alerts in the form of a text or email (or both) every time a bill is due. In conjunction with reasonable budget designed for paying off debt, you can watch your credit score climb higher and higher.
Credit scores can be damaged fast, but repairing them takes time. Three or four on-time bill payments aren't enough to make a difference, but each payment does help.
Sign up for your free Mint.com account and never forget about another bill again.