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It can reach the point where you don’t
want to pick up the mail. There isn’t much
to look forward to; after all, who writes
letters any more? The daily mail
invariably consists of a few pieces of
colourful junk mail and yet another pesky
bill to pay.
Believe it or not, those pesky bills are
the ticket to your financial wellbeing.
The way you handle those bills can make a
difference that you can measure on the
bottom line of your family finances.
A good credit score (the higher, the
better) is rewarded with good loan rates
and access to money when you need it. A
low credit score can cost you extra – even
on your mortgage, where the debt is
secured against your home. And you may be
refused credit just when you need it most.
You may want to check your own credit
score once a year – to ensure that all the
information in your file is accurate. You
have a right to access your own credit
records through a service like Equifax.
There may be charges for mailing or
internet downloading of your files, but it
can pay to know your own credit score.
It’s helpful to understand what’s behind
that credit score: what impacts your score
and what lenders are looking for when they
check your credit.
When those pesky bills come in, do you pay
them on time? Your payment history is a
significant factor in your credit score.
If you have paid bills late, had an
account that has gone to collections, or
declared bankruptcy, then your credit
score will drop accordingly.
How much money do you owe? Lenders will
look for a nice comfortable buffer between
your debt and your credit limits. If your
credit card or your line of credit are
always teetering at the top of their
limits, that is likely to have a negative
effect on your credit score.
How long is your credit history? Lenders
will be interested to know how long you’ve
been a borrower. If you have a long credit
history with a good payment record, you
will score high in this component. A short
credit history makes it difficult for
lenders to assess your risk – though if
you pay your bills in a timely way and
maintain low credit balances, these good
habits can offset a short history.
Have you applied for new credit lately? A
lender will be able to see if there have
been other “inquiries” on your credit
report. If you have requested new credit
several times in a recent period, your
score may be affected. Don’t worry about
routine checks or inquiries from your
existing creditors. Those inquiries should
not impact your score.
How much credit do you have and what types
of credit do you use? Both too much and
too little credit can lower your credit
score. Lenders will be looking for a
record of established credit accounts with
good payment histories. Too many credit
cards, or accounts with high-interest
finance companies can affect your credit
score.
So what doesn’t affect your credit score?
Personal information such as your race,
religion, sex or marital status are
neither recorded nor scored in your credit
history. And, perhaps surprisingly, your
salary, occupation and employment history
are also not relevant to your credit
history.
This year, whether or not you intend to
take out a mortgage or borrow money, you
should check your credit history and
ensure that all the information contained
there is accurate. You want to know what
any future lender can see. Secondly, make
those pesky bills in the mailbox your new
best friends. Be systematic about your
bill paying routine and reap the financial
rewards!
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