Managing Your Credit Score Responsibly
When it comes to personal finance, a lot of people are not really aware of how much their credit score affects them. In this world of plastic credit and disposable incomes, a lot of people have left their credit score to chance, paying bills when it's convenient and opening new accounts for things when it's not.
So what is your credit score and just how do you manage it? It might surprise you to learn that your credit score doesn't have anything at all to do with your income. Your credit score is determined by your ability to pay back your debts. A lot of factors can be used to decide creditworthiness, including income, but having that better paying job won't necessarily improve your credit score.
If you're late on a payment, or fall behind on a bill, that information goes on your credit report. Negative items will stay on your credit report for seven years, a bankruptcy stays on for ten. Your credit score is a three digit number that is determined by your ability to pay back your debts.
There are a lot of things people assume about their credit score that are primarily wrong. First of all, having no credit is not necessarily better. Some people have sworn off credit in all forms and fashions. This will not necessarily improve your credit score though. If you have no debts to pay back, then your creditworthiness cannot be reliably determined. This will lower your score, even if your bills are paid.
Another thing you don't want to assume is that just because it's on your credit report that you have to pay it back. The fact of the matter is, a lot of credit reports contain some kind of error or another. If you see something on there that you feel is not a debt you incurred, then dispute of the debt is possible. Disputing an item doesn't get it automatically removed however. The item is investigated over thirty days, and you will receive a letter regarding the decision.
If you want to take control of your finances and learn how to manage your credit score, there are a lot of opportunities available to you. The first thing you need to do is get a full copy of your credit report. This can be requested from one of the three main reporting agencies, or there are a number of other places you can obtain copies.
A lot of credit repair companies like to offer a free report as an incentive to manage your credit score with them. While sharing your information with anyone on the Internet can be risky, there are actually some reliable sites out there that actually do help manage your credit.
But the number one rule to managing your credit should be the one most people forget. If you can't pay for it, don't get it. Admittedly having a car or house on payments is advantageous because you get the use of them then, but there are some things you just shouldn't charge to your credit card.