TAKE CONTROL OF YOUR CREDIT IN 2016



take control of your credit

Would you rather: announce your weight or your credit score to a crowded room?

More people would rather admit their weight than their credit score, according to a 2014 National Association of Credit Counseling poll. If that’s you, now is the time to set some financial goals. Your credit score is like a financial Fitbit, monitoring your fiscal fitness. If your score is less than 670, you’ve got some room for improvement. So, how can you work out your wallet and get your credit in tip-top shape this year? Make simple resolutions you can stick to.

Here are 3 resolutions you should make in 2016:

1. Get a credit checkup at least twice a year
Credit reports can cost you, but you’re legally entitled to a free, yearly credit report from each of the three credit bureaus. Just don’t wait until you’re under the gun on a major purchase to learn your credit score – check it 2-3 times a year. If you want to be extra-thrifty, there’s a way to work the system, too. Every 4 months order your credit report from a different one of the bureaus (Experian, TransUnion, or Equifax). This way you can monitor your credit and track your progress throughout the year without paying a dime.

When going over your report, don’t just glance at the score. Take the time to review your full credit history. Look for errors and outdated information like credit cards you cancelled long ago. Negative factors are supposed to be dropped from your credit report after 7 years. Dispute any outdated or incorrect information with the bureaus.

2. Pump up your credit score with bi-monthly payments
30% of your credit score is based on your outstanding debts. That’s a huge drag on your credit score if you’re carrying a lot of debt. You should already know it isn’t wise to carry large balances or max out your credit cards every month. What you may not know is that credit card companies report balances at varying times of the month to the credit bureaus.

Even if you’re paying your credit card bills like clockwork every month, your credit report could be showing your balance without that payment. Instead, a high outstanding balance gets reported. If you’re trying to boost your credit score, you only want a balance of 30% of your card’s limit reported to the bureaus. Making a payment twice a month, even if it isn’t the full amount due, will maximize the impact of those payments.

3. Improve Your Credit Flexibility
If upping your credit score is the goal, then it’s important to understand the credit utilization ratio. It’s the percentage of debt you use compared to your available credit. 30% is the golden ratio. So, if your credit limit is $1,000, never use more than $300. Looking for a credit hack? Call your credit card company and ask them to increase your spending limit. You’ll have a lot more financial flexibility with 30% of $5,000 than you would with 30% of $1,000 – if you can pay it off.

Like body-building, credit-building doesn’t happen overnight. Set goals for your financial health. Stay informed about what you can do to help or hurt your credit score. Lastly, make sure to contact your PERL mortgage advisor to find out if your credit is in shape and how it might impact your ability to buy a dream home.