Maintain a Healthy FICO Score!

“Owe no one anything except to love one another, for he who loves another has fulfilled the law.” Romans 13:8

FICO scores are 3 little numbers that determine if you can get loans, credit cards and sometimes even jobs. Amazing how these 3 numbers have so much power! For a single mom it is extremely important that we keep an eye on our credit scores. Here are a few tips on keeping your FICO score healthy:

What is a FICO Score– FICO score is a 3 digit number given to an indvidiual based on various factors that lenders use to determine your risk. You have 3 FICO scores from 3 credit bureaus, Transunion, Equifax, and Experian. Usually, your score won’t be the same for all 3 but they shouldn’t be wildly different either. Your scores will flucutate from time to time.
-What is in Your FICO Score? All of these factors are considered both positive and negative.

  • Payment History-35% of score
  • Amounts Owed-30% of score
  • Length of Credit History-15% of score
  • New Credit- 10% of score
  • Type of Credit Used- 10% of score

Payment History
You want to be extra dilligent about paying your bills on time. Payment history is a whopping 35% of your score. Every late payment is recorded and is a hefty ding to your credit score. If a lender notices a pattern of late payments, there less likely to give you a loan. Keep your payment history current by:

1. Pay bills on time.
2. Set up automatic bill payments to ensure you won’t be late
3. If you’ve been delinquent try your best to stay current, after awhile these negative marks will mean less to your score.
4. If you’re having problems paying on time contact your creditor and set up arrangements. It is better than the account going into collections. Collections will stay on your report for 7 years!

Amounts Owed
The higher your debt to credit ratio the lower your score. Keep it below 30% if possible if you reach 40% lenders look at you as risky. Look at your credit limits and the sum of your available credit for example if you have a credit limit of 10,000 with a 2,000 balance your credit to debt ratio is 20%.

1. Keep balances low on credit cards and revolving credit. If possible pay off balances at the end of the month to avoid finance charges or try to pay more than the minimum.
2. Don’t close cards unless necessary this will lower your available credit. Old credit cards also establish length of credit and will boost your scores. Only close it if you are paying monthly fees.
3. Don’t open a whole bunch of credit cards this is a ref flag for credit bureaus.

New Credit and Type Of Credit Used
Minimize credit card and loan applications. Too many inquires can lower your score. Installment debt such as student loans, mortgages and even car loans are good for your credit score if they’re paid on time.

Order Your Credit Report
You are entitled to one free credit report a year please order one! Also if you are denied for credit you can obtain the credit report the company used. Check for discrepancies, it is unbelievable how many mistakes are found on credit reports. Once you locate a  mistake dispute it with the credit bureau either through writing or online. Be wary of identiy fraud. If you suspect fraud contact your creditors immediately and put a freeze on your credit.

Monitor Your Credit Score
If you’re in the process of rebuilding your credit, monitor it by ordering your score through FICO or signing up short time for one of their monitoring tools. This is also useful if you’re going to make purchase such as a house or car.

Creat a Goal
Financial goals help you to attain a healthy financial future. If your credit score isn’t as high as you’d wish, create an action plan to meet your goal. Credit Score ranges are from 300-850 if your score is above 700 it is great if its below 600 it isn’t so good. The higher your credit score the lower your interest rates and the more money you save.

Financial and Credit Resources
If you haven’t already order your credit scores:

Also check out Suze Orman’s site and Jean Chatzky for some great financial advice. Jean’s blog has a wealth of information and videos.

Single mom’s have serious financial responsibilities and its vital to keep yourself educated on all of your financial options and to maintaing a healthy credit score. Don’t allow yourself to become a slave to debt, a bright financial future is yours if you take control of your finances.

Disclosure-I am not a financial consultant. Please consult your financial advisor for advice on finance.

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