Our credit score can determine several important financial aspects of our lives such as whether or not we are offered a job, the daily withdrawal limits on our debit cards, the amount of our insurance premiums, and whether or not our mortgage is approved.
It is important to regularly order and review your credit report (and your score), because it allows us to keep up to date on all our open credit accounts and history.
A client with a credit score of less than 600 is considered to be a high risk client. A credit score of over 800 is considered to be a very good, and it could allow us to receive the best credit products, a superior service, as well as lower interest rates. A low credit score doesn’t necessarily mean that we are financially irresponsible. It could mean that we have more debt than we can afford compared to our annual income, even though our payments are always made on time. A lower credit score could also mean that we have a lot of recent inquiries from creditors on our credit report.
In general it takes 6-12 months for a person to start rebuilding their credit history. Coincidentally, this is exactly how often we should order a copy of our credit report. It is good to order our credit report once or twice a year to view all credit accounts in our name and make sure our personal information is up to date. If someone is declined for credit, we advise them to reapply within 6 to 12 months.
Younger couples who are saving for a mortgage, or who have a lot of outstanding debts should view their credit report twice a year to make sure their information is reported correctly. Older people who may already be financially stable, and don’t often apply for credit or use their credit cards, should order their credit report once a year just for information purposes.
Personally, I order my credit report once a year because I don’t often apply for anything that requires a credit inquiry. I already have a stable job (knock on wood) that I love, as well as two credit cards. However, if I decide to open a new bank account, or change jobs, or apply for another credit product I would definitely order my credit report beforehand. I like to keep up to date on my credit report because I’m organized. However, my boyfriend Nick thinks that I’m just being a control freak.
Our credit report shows all credit applications, inquiries, as well as all open credit accounts. It is important to pay our bills on time and always make at least the minimum monthly payments on our credit cards. Whether we make the minimum monthly payment, or we pay more, it doesn’t matter. For our credit score all that matters is that we make the payments on time.
It is not only credit card companies that report our payment history, utility companies also report to the credit bureau. That’s why it is important to always keep our bills up to date. Technically, we have almost 60 days to make payments before it affects our credit. Creditors report our payment history on a monthly basis, usually at the end of the month.
As an example we receive our VISA bill on September 1. The payment is due on September 21. It doesn’t affect our credit until it is past 30 days late, which would be approximately October 21. Therefore, we have from the date we received the bill on September 1 until October 21 to make the payment until it is reported to the credit bureau at the end of the month, even though the payment is due on September 21.
I wouldn’t suggest that we take advantage of this though. Late payments often incur a late payment fee as well as additional interest. Remember that credit card interest is charged on our average daily balance.
If you’ve never pulled your credit before, start today! In the U.S. you can get an honest to goodness report from all 3 major credit reporting companies (Experian, Equifax, and TransUnion) for FREE once a year through Annual Credit Report.com. It’s the official site in accordance with the Fair and Accurate Credit Transactions Act (FACT Act). It doesn’t give you your credit score (that, you have to pay for), but you can at least get full transcripts of your record. And that’s one of the most important things to watch.
(Photo By Inha Leex)
Kristina Tahnyak
Tahnya is a Certified Financial Planner and former Investment Advisor turned marketing and communications professional She holds a degree from Concordia University, is debt free and currently works in the field of digital marketing.
I’m wonder, is it possible to have a zero credit score? If you had no debt what so ever. If I paid off my mortgage and credit cards. Would it go down to zero? How would it be interpreted by different company’s like insurance or even prospective employers. Maybe people worry to much about it.
Yes, it is possible to have a 0 credit score. This is more likely for new arrivals who have not yet established a credit history, or for students who have recently reached the age of majority and are able to apply for their first credit card. When we view a credit report we are able to see a 24 month payment history on active credit products. We also see all credit products whether active or closed as well as their final status i.e. bankrupt, closed by client, closed by company without prejudice etc. I hope this helps.