Let's Talk About Credit

• The higher the score, the more creditworthy a lender considers you. Scores on the lower end of the scale may indicate that you are inexperienced with debt management.
• Experian explains that, “The FICO® Auto Score is a special variation on the FICO® Score designed for use in the auto financing industry and tailored to predict risk of default specifically on car payments. FICO® Auto Scores are generated by making additional adjustments to standard FICO® Scores, but they use a different score range, 250 to 900, with higher scores indicating lower risk.”

This card will require a security deposit which is used as collateral if you are not able to make payments. Use this card for smaller purchases, like gas or groceries. Then when the statement comes at the end of the month, pay the bill in full.

Ask a family member or close friend if they are willing to add you as an authorized user on one of their accounts. After payments have been made, they will be reflected on both the original card holders and your credit report. The only stipulation is that since you are not the original credit holder, there will be limits to how much this will affect your credit score.

Ask your landlord and service providers (cell phone and utility company) to report your payments to the 3 credit bureaus (Transunion, Equifax, Experian). This can help establish a good history of payments, proving creditworthiness to lenders.

One of the best ways to improve your score is to pay down your debt.  Start by reviewing your accounts, then make a plan that you can commit to.  When you review your accounts, sort them between installment and revolving accounts.

• Installment accounts: Typically loans with a fixed amount and a repayment schedule, like mortgages, student loans, and auto loans.
• Revolving accounts: These accounts usually have a credit limit that you are able to borrow from more than once.

Your credit utilization on revolving accounts has a huge impact on your credit score. Your score is calculated based on the balances of individual accounts and the balance of your credit cards altogether. When you pay off credit card debt, it can help boost your score more quickly. Since creditors report balances to the bureaus every 30 days, it will take time to see your score go up.

• Interest rates: Paying down balances with higher interest will save you more money.
• High balances: Some cards may have a higher balance than others, which means that the individual credit utilization for them will be high. Pay these down to lower your utilization rate for that card.
• Low balances: Paying off the lower balances can minimize total credit utilization.

• Debt snowball payment plan: Start with the card that has the lowest balance first. After that balance is settled, then apply those payments to the next cards balance that you focus on.
• Debt avalanche payment plan: Start with the card that has the highest interest rate. Once that card is paid off, then use the money from those payments to put towards a higher payment on the next card you focus on.
• Debt management plan: Seek help from a credit counselor who can guide you through a debt management plan (DMP). While this is a great way to lower your debt, you will most likely be required to close the credit accounts.