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Before I lost my job and all hell broke loose, and my finances landed in the toilet, I THINK I had a good credit score. Truth be told, I didn’t really know because I never checked it. It wasn’t until I started learning about money and things like credit scores and interest rates that I realized just how valuable knowing what your score is to your overall financial picture.
So without fail, each year I do two things:
I check my score with Credit Sesame (it’s free, and they don’t ask for a credit card or anything, and I request all three of my credit reports from the credit bureaus (also free as long as you only request it once per year.)
Your credit score goes up and goes down depending on lots of factors. The problem is most of us have no idea what goes into making it move around so much. We are clueless to the algorithms that measure our creditworthiness.
I do know that significant issues affect your score. The reason I know this is because of my inability to pay my creditors and the fact that I was facing foreclosure on my home if I didn’t clean up my act seriously affected my score.
Having a regular job and conscientious money habits allowed me to have a pretty decent credit score. It was somewhere in the vicinity of the upper 700’s. Of course, I can’t tell you exactly what it was because back then I didn’t check it that often – well, at all. The only time I was aware of my score was if I was applying for credit.
But I always paid my bills on time and so my credit score was pretty good.
Once I lost my job, and I was facing possible foreclosure on my home, my credit score sank to an all-time low of 410.
It’s funny how I can’t tell you with any certainty what a good score was back then but I vividly remember how low it got.
As I started to pay off my debt, and get a handle on my finances, my credit score climbed. Two years ago when I purchased my new car, and my credit report was pulled, it was a whopping 803. I remember thinking “WOW! I’ve come a long way!” Even the finance specialist remarked, “Finance guys like me bow down to you. We never see scores like that; you can buy whatever you want.”
But beyond my situation with my credit score, I figured there must be many others like me out there that have no idea what might affect their credit score negatively.
THE BIGGEST ISSUES THAT WILL HURT YOUR CREDIT SCORE
1. Anything that can be found in public records such as liens, judgments against you and of course the doozy of them all – bankruptcy. All of these rank as some of the most damaging events on your credit score, but bankruptcy is the worst of them all. Whether it’s Chapter 7 or Chapter 13, it can stay on your credit report for up to 10 full years.
2. You know how you can sometimes be late making payments? Well, if you are 90 days late that is deemed “severe,” and all severe late payments are reported on your credit reports. These late payments stay on your report for seven years, but new creditors are less likely to give it much consideration after two years.
3. Charge-offs can occur after failure to make payment after 30 days although most lenders give you more than one month before a charge off occurs. They sell the debt to a collection agency, and it remains on your credit report for seven years from when the account was 180 days past due.
4. Collections occur after you have not paid your debt for over 90 days. It’s the second most common offense people make and will stay on your credit report for seven years. Collections can occur for unpaid medical bills, school loans, credit card debt and they’re all equal in the eyes of the credit score.
5. Settlements happen when you or someone on your behalf negotiates a settlement of your debt. Typically the credit card company or bank will accept less than what is owed. Short sales fall into this category, and yes, again it stays on your report for seven years.
6. Repossessions typically occur with cars – at least that’s what most people think. But the truth is any loan that is secured by an asset can be repossessed. Even after they come and take your asset, you still may owe them money. Again it stays on the credit report for seven years.
7. Foreclosures have risen over the last several years and will remain on your credit score for seven years.
None of these sound all that wonderful and the fact that all of it stays on for seven years or more can be frightening.
But here’s some good news: what doesn’t hurt your score is how much money you make and how many credit cards you have as long as you are paying them on time each month. Good news for many.
HOW OFTEN TO CHECK YOUR SCORE
A couple of years ago, changes in the law required you be given a copy of your credit score if your credit score is used to deny you credit, revoke your credit or change the existing terms of your credit.
The lender has to provide you with the particular score that was used to make the decision. Along with your credit score, you get the range of scores (so you can see where you fall) along with the factors that brought your score down in the first place.
Here’s a quick chart to see what your score means:
Excellent Credit…. 750 above.
Good Credit… 700-749
Fair Credit… 650-699
Bad Credit… 550 or below
Keeping on top of your credit score is very important, and most of us don’t check our scores nearly enough.
Checking your credit score and credit report is a really smart thing to do.
So why is it important to check your credit score?
Knowing your credit score provides many advantages and can help you save money. Credit scores are used today for everything from helping you land the perfect job, to securing an apartment, mortgage, buying a car – just about everything.
When you’re in the dark about your score three things can happen:
- you could be wasting money
- get taken advantage of
- or both
Payday loans and people who claim to not care about your credit score are predatory loans and should be avoided at all costs.
Do yourself a favor and check your credit score today at Credit Sesame. It’s totally free.
And no matter what the number reveals, you now armed with the knowledge and power to do something about it.
Check now – it will take two minutes to find out.
WHAT ABOUT YOUR CREDIT REPORT?
I recommend checking your credit report three times a year. You can check it for free by going to Credit Sesame. You’re allowed one free credit report a year from each of the three major credit bureaus.
Pull one report on a rotating basis from either Experian, Equifax and TransUnion. By doing this, you will have a look at your score and report once every four months and will be able to compare and check for anything suspicious.
Checking your credit is a smart thing to do as you work towards improving your overall financial health.
Grab your free copy today and see how you’re doing.
Equifax had a significant data breach in 2017. Read this article before you visit their site or sign up for any type of credit monitoring.
No matter how much you make you can always establish good credit.
If you can refrain from doing any of the above huge money no-no’s, you’ll likely to preserve your credit score.
No matter what ends up happening, rebuilding your credit score can happen. It just takes time.