This week, Craig Siminski, of CMS Retirement Income Planning, shares an article discussing the components that determine your credit score and provides tips for maintaining a high score or raising a low one:
The average FICO® credit score in the United States reached a record high of 711 in 2020, despite the financial challenges of the pandemic. In fact — contrary to what might be expected — consumer debt management improved after January 2020, with shrinking debt, decreased use of credit, and a drop in late payments.
This may reflect more cautious spending by consumers in the face of a struggling economy, as well as support from government stimulus. Even so, credit scores have been steadily increasing for the last decade.
An Important Number
Your credit score can influence loan approvals and terms for a variety of financial transactions, not only for major purchases such as a home or car but also for credit cards, insurance premiums, and home rentals. It may even affect a job application.
The most common score, using algorithms developed by Fair Isaac Corporation (FICO), is a three-digit number ranging from 300 to 850. All three national credit bureaus (Equifax, Experian, and TransUnion) generate scores based on information on file with that agency, so you may see different FICO scores, and there are also non-FICO scores.
Any version of your score should provide a good idea of how lenders view your credit. Many major credit cards offer scores and related information without charge to account holders.
Here are some tips that might be helpful if you want to improve your score or maintain a current high score:
Use at least one major credit card regularly and pay your accounts on time. Setting up automatic payments could help avoid missed payments.
If you miss a payment, contact the lender and bring the account up-to-date as soon as possible.
Keep balances low on credit cards and other revolving debt. Don’t “max out” your available credit.
Don’t open or close multiple accounts within a short period of time. Use older credit cards occasionally to keep them active. Only open accounts…
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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 23 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.
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