More Ways to a Better Credit Score

Since my last post on “Working Toward a Better Credit Score” I have found a few more good tips to share. Most of the tips in this post are about using credit cards correctly to help build your FICO score at the three credit reporting agencies. If you know what makes up your FICO score, you can focus your credit building actions on how to best impact your own credit report.

The average American family has eight credit cards. General-purpose credit cards include Visa, Mastercard, American Express and Discover. Other types of credit cards include retailer-specific store cards, gas cards and  travel rewards cards. The total of all the different credit limits and how much you owe on each one in relation to the limit is calculated into a number called your “credit utilization ratio.” A good ratio is about 7%. According to industry experts, up to 20% is OK, but over that will negatively affect your FICO score.

First tip is: Don’t apply for too much credit. Eight credit cards are more than plenty for the average household. I personally only keep two general purpose cards, two retailer cards and one gas card. Not only is every card recorded on your credit report, but every time you apply for a new card is recorded as well. If you suddenly start applying for several more credit cards, you get flagged for being “credit hungry” and can be a reason for your next application to be denied or your existing cards might increase your interest rate and minimum payment amounts. About 10% of your FICO score comes from new accounts.

On the opposite side, you don’t want to suddenly close credit card accounts. If you decide to close an account, choose one of the newer accounts and pay off the balance in full – don’t just transfer the balance to a different card. The older your account, the better. Up to 15% of your FICO score is based on:

  1. The length of time each account has been open.
  2. The length of time since each account’s last activity.

My last tip is probably the most important: pay more than the minimum amount due every month and get the balance on each credit account down to just 35% or less of the credit limit for that account. This “credit utilization” is 30% of your FICO score.

Working Toward a Better Credit Score

This next year might offer me some exciting opportunities to relocate, so I am going to be working toward a better credit score. I want to be ready to buy either a house or property suitable for a custom home, and I’ll need to get a mortgage to help make that happen.

I have been searching for good tips on how to improve my credit score, which is a big challenge. I have been the victim of identity theft the past four years, and when people tell you that is a nightmare to fix – believe them! I still get blindsided with notices from all kinds of creditors for things that I did not do. So, I check my credit report every month to catch the things that are not mine and am working to build a better credit score with things that I can do and can prove that I’ve done.

Besides needing a good credit score for a mortgage, there are other ways that credit scores can affect you. If you want to borrow money for any reason, such as buying a new car or wanting a new credit card, you need a good score. Your credit score determines not only if you can get a loan at all, but also how much you can borrow or charge, and what interest rate you will have to pay. So, it is important to stay on top of your credit reports.

First thing you have to do is get copies of your credit reports from all three of the reporting agencies. You can request them online, the fastest and easiest way. The three companies are:

  • Experian
  • Equifax
  • Transunion

For a free copy once each year, go to AnnualCreditReport.com Federal law says that you are entitled to this information once every 12 months at no charge. If you want copies more often, you might have to pay each company a small fee, or you can check with your credit card company to see if they make your credit score available as part of your account benefits.

Once you get the reports, go over them carefully and make sure that everything is correct. If you find any errors, take steps to get them corrected. There are links on each credit reporting company’s web site that tell you how to dispute any mistakes.

The next step is to find out what your FICO score is and that should be shown on the free report, too. The FICO scores range from 300 (not good) to 850 (the best you can get). The best interest rates are usually offered to people with a FICO score of 720 or higher. Scores under 500 make it very difficult to get a loan at all.

To get a better FICO score there are a few things anyone can do, but they take time and dedication, and maybe a little sacrifice of things you want but have to wait on.

Pay your bills on time! All of your bills are important parts of building good credit. They tell a potential lender or employer that you are responsible, make good decisions, and have integrity.

Pay your mortgage or rent on time. Not only are the late fees killer, but every late or missed payment is put on your record at each of the three reporting agencies as a red flag and hurts your FICO score for several years. This is usually the biggest chunk of the average household expenses and it is the most important. Although most lenders and landlords allow up to 33% of you income to go toward your mortgage or rent, it is more prudent to keep this expense below 25% of your monthly income.

If you have credit cards, make sure you pay AT LEAST the minimum payment every month, on time, no excuses. Even better, keep the balances on your cards below 35% of your credit line. Don’t ever skip a payment and NEVER go over your credit limit – that will hurt your FICO score for a long time. But balances that consistently stay under 35% of your limit give you bonus points for your FICO score. This is completely within your control – do not charge more than you can pay off when the next monthly statement comes.

If you have a bank or credit union that offers automatic bill pay, sign up for that and make sure you keep enough money in your account to cover them. This helps make sure your bills are paid on time, especially helpful if you travel a lot or have a hectic lifestyle and tend to forget paying the bills. Plus, you don’t have to worry about any delays in the mail delivery or in the company processing your payment.

About one third of your FICO score comes from your track record for paying your bills on time. This is probably the single most important thing you can do to get and keep a good FICO score.

Don’t Steal From Your Employer

Today there was a big debate on Facebook about a news story that Cracker Barrel fired an employee for giving a homeless vet a free muffin. Almost everyone on that thread wants to boycott Cracker Barrel for being heartless and not supporting our vets. Sorry, but not many businesses can allow employees to give away their products or services for free. Cracker Barrel has an excellent training program and goes to great lengths to make sure their employees do not pilfer from the restaurant. Be honest – it is basically stealing when you do that. He had been written up 5 times for doing this. I would have fired him, too. If he had paid for the muffin himself would be one thing, but stealing from your employer to “do good” is not OK.

Everything in that store costs money – even the little packets of mayo and sugar. It is the employee’s job to provide the product and collect money for it. One of the biggest problems retailers have is employee theft. You cannot allow employees to just take or give away whatever they want. Cracker Barrel will survive this PR issue just fine. They make good food, have unique gift shop items and are conveniently located across the U.S. They will not go out of business for firing a guy who was stealing from their company.

Cracker Barrel has a very thorough training program and clearly stated policies and procedures. Employees are not allowed to give away food or other products. They are allowed to pay for the food or products themselves and then give it away. But they are stealing if they give away anything for free.

I have worked for restaurants and bars and run several businesses. When I was a bartender at a free pour bar in DC, the boss would come in and actually count the number of liquor bottles in the trash and then tally numbers against the days receipts to make sure we were not over-pouring or giving away free drinks. 

My step daughter worked for a convenience store and was allowed to have all the free soda she wanted while on her shift. She could not have free soda if she was off her shift and could not give free soda to family or friends.

Have you ever asked for a cup of free water at McDonald’s? They tell you no, because they have to charge you for the cup. Now they charge you for extra dipping sauce and other condiments, too.

It would be nice if maybe the employers had a charitable policy of dedicating a certain amount they could allow to be given away to homeless people or customers in distress, but most do not. If you are going to work for somebody else, you have the obligation to look out for that employer’s best interests – and stealing from them is not the way to do that.

Air Conditioning is a Modern Convenience

I grew up without air conditioning, but the houses and commercial buildings were built differently. They had huge windows, several feet of roof overhang, floors raised up off the ground, high ceilings, screened porches, you didn’t turn on the lights during the day unless you needed them for a certain task or safety, and on the hottest days we had fans.

None of the schools I went to had air conditioning until my senior year in high school when they built a new library and put air conditioning in the library to protect the books. The students’ comfort was not even considered.

Now we live, work and shop in air conditioned comfort. It is unusual to be in a house or building that is not air conditioned. If I ever get the chance to build a cabin or small house, I hope to make it as energy independent as possible and not have to depend on air conditioning to be comfortable most days.

Kids Get Fall Break Nowadays

Not that I am any kind of geezer who complains about the “Good Old Days,” but it bothers me a little that today’s kids go to school on a totally different schedule than what I had to observe when I was in school. Around here, they start back to school the first week of August, which is more than a month earlier than when we started back the day after Labor Day, and that ends their “Summer Break.”

Then, the kids here get off two weeks for what they call “Fall Break,” then they get “Winter Break” and then “Spring Break.” Notice the pattern? They have removed references to holidays. Also, they have shortened what we called summer Vacation to just 2 months, instead of three. That is because they spread that other 4 weeks out during the year to give them longer “breaks.”

Maybe the kids like to have “Fall Break,” but what on earth do all the parents who work do with their kids being home for two weeks in October? I don’t know many employers who are going to happily let the moms stay home for two weeks, especially no one who works in retail when they are ramping up for the Christmas shopping season. There is not much to do in October – it’s too cold to go swimming or fishing and there are no festivals or fairs or anything fun to do with kids.

I think the school administrators are trying to gradually force year-round school on everyone and by sneaking in a few days here and there they are hoping that nobody notices. That annoys me greatly. I don’t agree with year-round school and I LIKE having the kids out of school for three months in the summer. And I like having time for the kids to play sports, go visit family, and just have fun being kids. What do you think about year-round school?