New Year, Better Credit Score: Post 1

I am not sure about your workplace but mine finally feels back to normal!  Everyone is back from vacation refreshed, and things are back in full swing.  It’s oddly comforting, despite the fact that I would rather still be on vacation.

I got some very good news for the new year.  No, it is not that I got my well deserved but overdue raise at work (I wish)… I found out my FICO score went up over 50 points.  It may not seem like a big achievement to most people but I have learned the hard way how important it is to have a strong credit score and my hard work is finally paying off.  Your credit score is how the world judges your financial stability and when you are marked with “needs improvement” your goals, especially in this economy, are going to get harder and harder to reach.

Think you aren’t affected by a lower score?  Your score is checked whenever you buy a car, buy a house, apply for life insurance, open a credit card, get a cell phone, even apply for a job a lot of times.  For those of us with not-so-spotless credit records (mine was courtesy of the an obscene amount of medical bills when I had no health insurance) these blemishes represent higher interest rates, which can equal a lot of money or even cost you the ability to get a loan at all .

Let’s put it this way, in the Dec 08 those who wanted to buy a house and had a credit score in the top 33 percent were paying  6% for a $300,000 mortgage.  The average borrower would pay at least 7%.  That extra 1 % in interest works out to $50,000 difference in interest over a 30 year loan, paid at the front end.  Most people don’t really notice how the lower score translates into dollars … a lot more dollars.  Since I want to buy a new house in the next three years my number one goal is to get my score as high as possible, because bottom line is, it will cost me a lot more money if I don’t or I wont be able to get a loan at all even.

While any score above 750 is acceptable, the best loans go to those above 780 (for the FICO illiterate the scale is from 300 to 850). Good news is that you can get your credit report absolutely free every six months from all three major credit reporting agencies; Experion, Equifax and Trans Union (try this website).  Bad news is that your credit score is not free (usually $7 - $10 per company), but is totally worth the money!  I didn’t know when I first started tracking my score was that all three companies can have very significant differences in what they report, so get reports and scores from all three agencies.   While Trans Union is honoring me with an outstanding score, over 750, Equifax is still only giving me a 695.  Equifax is deducting for one late payment on a credit card in 2003 that I don’t even remember!  This is a good example of why it is so important to make sure every bill is on time and that you follow your credit report closely to catch errors.

So make your New Years Resolution to get your credit report and your credit score (all three!).  It is important to know where you stand, especially if you plan to get a loan, buy insurance or apply for jobs in the next 7 years!

For those who are making this resolution or maybe want to improve your credit score I will be following up with more tips and info about your credit report and score so stay tuned!