Financial Behaviorist Syble Solomon joined me on âTurn the Pageâ to discuss how her Money HabitudesÂ card game, which has been used by hundreds of thousands of people globally, helps people to have their âbest everâ conversations about money. These types of dialogues can support couples in staying together, the wealthy in improving their quality of life (affluence does not imply well-being!), and those who are financially challenged to thrive.
Listen to our episodeÂ for insights that will guide you in better understanding your spending and saving behaviors.
âCreditâ is a topic that goes hand-in-hand with your habits and attitudes about money. Subsequent to our show, Syble and her colleague, Lee Gimpel, with whom she created The Good Credit Game, provided information that will assist you in optimizing your credit score. Given the variability in how credit works in different parts of the world, the suggestions they shared are best applied in the U.S. Hereâs what they said:
WHY CREDIT IS IMPORTANT TO YOU
Your credit score is derived from the contents of your credit report at the time that the data is requested. Different companies produce both general scores, and ones that are specific to particular industries and different types of credit requests. Your score answers the question, âHow much does the financial system trust you?â It determines the likelihood youâll be approved for credit or a loan, and the rates youâll receive.
Your credit background is increasingly used beyond traditional places like getting a mortgage or car loan. It may figure into whether someone will rent to you, or if you qualify for a job, especially those that require security clearances. Lower credit scores can mean higher car insurance rates. Statistically, people with lower scores make more insurance claims.
START BUILDING GOOD CREDIT NOW.
It takes time to build good credit. If you plan on buying a house in five years, start improving your credit today â not right before buying that home. The difference between great credit and OK credit could mean that you get a loan that’s hundreds of dollars cheaper per month, which will save you thousands of dollars over the course of that loan.
HOW TO OPTIMIZE YOUR CREDIT SCORE
The most important factor in your credit score is whether you pay your bills on time and as agreed. Â This payment history accounts for 35% of your credit score.
Don’t max out your credit. Your credit score tends to suffer if you use a lot of your available credit at once, even if you pay your balance in full each month. A typical rule of thumb is to use a maximum of 30% of your limit. So if your card has a $10,000 limit, try to stay under $3000 in any given month. Increasing the credit limit on your account might improve your score in the longer term, if it enables you to use a smaller percentage of your credit limit.
Paying off your credit bill balance in full every month saves you a lot of money, while paying just the minimum will cost you a lot! Closing all old credit cards can lower your score. You can lose history and the lower overall credit limit can also hurt your score.
If you canât pay your bill, contact the credit card company to work out a solution. Donât ignore the bills. There will be late fees, and the balance will keep growing as interest will be charged on the new balance each month. This can lower your credit score, especially if outstanding balances go to collections agencies.
When you request your credit report, it is a âsoftâ inquiry and doesnât lower your credit score. âHardâ inquiries are associated with financial commitments such as getting a loan or applying for a mortgage, credit card or line of credit. They can lower your credit score.
As long as you can make timely payments on what you owe, use credit! A minimal or nonexistent track record of paying back debt might lower your credit score and cause vendors to charge you higher interest rates. Since research shows that past behavior is indicative of future behavior, lenders want to see how youâve handled similar situations.
FIX ERRORS ON YOUR CREDIT REPORT.
Credit reports often contain mistakes that can lower your credit score and/or reveal fraudulent activity. Errors like a misspelled name or incorrect address may cause someone elseâs information to impact your scores. There are lots of fake “free” services out there, so ensure that youâre utilizing credible sources. Check your report from each of the three main credit bureaus annually. Itâs free at: http://www.annualcreditreport.com.
HAVE CONVERSATIONS ABOUT MONEY.
Reading Sybleâs â10 Tips to Talk About Money with Your HoneyÂ article, and using her Money Habitudes cards or on-line tool can help you to better understand your âmoney personality.â If youâd like to educate adults and young adults about credit reports, scores, and credit cards â in a fun and hands-on way â include the The Good Credit GameÂ in your discussions.
Listen to my conversation with SybleÂ to learn more!