Keeping score with your credit score

Whether you know it or not there are people keeping track of your numbers. No, it's not the number of times you started a diet this year or the number of sit-ups you've done this month. In fact, it is not your weight, cholesterol, or golf handicap. But three different credit bureaus track your credit history and that information is used to calculate and report your credit score.

Why should you care? Your credit score may determine whether you are offered a loan, preferred interest rate, an insurance policy, or even a job. Many businesses use your credit score as a way to assess your ability to handle your financial responsibilities. Think of your credit score as your financial GPA. Your score could range from 300 to 850. Of course, the higher, the better.

What should you do? Here are a few suggestions to help you keep tabs on your credit score:

1. Get a free credit report each year. Congress passed a law that requires the credit bureaus to provide you a free credit report each year. Go to www.AnnualCreditReport.com. You can request a free report from the three reporting companies Equifax, Experian and TransUnion. However, to actually get your FICO score you must go to www.MyFico.com. There is a $45 charge for this service that provides the three credit reports and the FICO score. After the initial check-up you may not need to pay for the FICO score information again unless you are planning a major purchase that involves a loan or you are applying for a new job.

2. Check the report for accuracy. Mistakes are common on the credit reports. Check the accuracy of the information including your previous jobs, your previous addresses, and the accounts that are listed. Check to make sure that any accounts that you thought you closed are actually closed. If there are accounts that should have been closed contact those companies to close the accounts. For other errors, contact the reporting bureau in writing.

3. Know what things affect your credit score. There are many factors that make up your credit score. The two most important are your payment history and the amount owed. Always pay all of your bills on time if at all possible, even if it means only paying a minimum amount. Even one late payment can impact you in a negative way. Set up automatic payments from your checking account so you don't inadvertently miss a payment. Also, keep your debt to available credit ratio to a minimum. Try not to ever max out a credit card and never go above a spending limit. Also, do not open up too many credit accounts. This goes against your score.

A little knowledge and planning can go a long way toward helping you keep a good financial score.

Don McLeod, CFP is an Area Director in Retirement Solutions and Services at GuideStone Financial Resources.

By DON MCLEOD
Guidestone Financial Resources