Thursday, August 28, 2014

Protect Your Score


Have you watched your favorite football team take a commanding lead in a game, ensured a win because their score was twice that of their opponent? Then the drama begins. Suddenly this fabulous score doesn’t look as great because they are being outplayed.  They may have slacked-off; took a few penalties or dropped the ball because they misunderstood the play. In the end they didn’t play defensively.

What about you? We take part in a game where we must protect our score.  Every time we borrow money or require a service {cell phone, rent an apartment), someone checks your credit score to ensure you are creditworthy.  Quite often people do not understand they are graded on their performance. Credit reporting agencies, like Equifax or TransUnion, are keeping tabs on “your stats” to determine how well you manage credit.  The better manager you are of your debt the higher your “Credit Score”; the poorer you are at managing your debt, the lower your score.  The good news is you can defensively put into action strategies to either protect or improve your score.  
Five Ways to Create the Winning Play with Your Credit

1.  Make your monthly payments on time. Knowing the due dates of your debt obligations in advance ensures you have set money aside for monthly payments.  Being consistently late with your payments will appear on your credit and lower your score.
2.  Pay the minimum payment even if you are unable to pay the entire balance on your credit card.  Even if the minimum payment appears insignificant (i.e. $10), ensure you pay at the very least this minimum amount.  If you don't, you are sending a message to the world you can't make a larger payment either ($310, $510). Many people opt to miss the small payment and vow to pay double the amount the following month.  This strategy ends up hurting their score. 
 
3.  Limit the number of credit inquiries others conduct on your credit report.  (i.e. credit cards company, car dealerships, financial institutions).  Most people do not understand that an excessive number of credit inquiries “take hits” against their “Credit Score.”

4.  Stay within your credit limit. Credit card companies are notorious for allowing you to exceed your credit limit especially when you diligently make regular payments.  You may trigger a penalty which results in a transaction fee; but what’s worst--your credit score also drops.

5.  Resolve unsettled disputes. By taking a stand and refusing to pay for an unsatisfactory service or product, you may find this unpaid bill appear on your credit report.  The best you can do is to reach a compromise to ensure the unpaid bill doesn’t jeopardize your credit report.

Now that you are informed about ways to protect your score, Financial Consumer Agency of Canada has a short five-question quiz to test your knowledge. If you are interested in taking the quiz, click here

THE CHALLENGE:
  •  if you don’t know your score, apply for your credit report. 
  • if you don’t like what you see, put into effect winning plays to improve your score.
  • if you like what you see, continue to protect the score.

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