Sep 15, 2020

Step 6: Increase your credit score

By Stacy Paradise

I’ve been sharing some of the key steps I believe to be most important in improving your financial situation. So far, I have gone over;

Step 1: Discover Your MoneyMind®
Step 2: Create a Spending Plan You Love
Step 3: Track Your Spending
Step 4: Stop the Leaks
Step 5: Create a Savings Plan That Supports Your Dreams and Goals.

Step 6 is to increase your credit score! This won’t happen overnight and it will most likely take some work, but having a good credit score could save a lot of money over your lifetime which will allow you to live a better financial life!

Getting grounded financially is a necessary step toward financial independence. To begin, you must know where you stand financially, especially in areas you may have been avoiding.

Here are a few suggestions to help you to become grounded financially.

  1. It is imperative that you CHECK YOUR CREDIT REPORT regularly and review it for accuracy. According to Equifax, “By law, you are allowed to get one free copy of your credit report every 12 months from each of the three nationwide credit bureaus by visiting www.annualcreditreport.com.”
  2. You can do this online or by calling (877) 322-8228 or mailing: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. The three credit agencies are Equifax, Experian, and TransUnion. Each agency may list different information so you must look at your credit report from each.

    There are other websites that can assist in obtaining the credit reports from all three agencies and most will charge a fee to disclose your FICO score. It is not necessary to know your FICO score when reviewing the accuracy of the credit report however some people enjoy seeing their credit score improve with all of their efforts to transform their financial lives. (Some credit card companies will list your FICO score automatically on your monthly statement for free.)

  3. If you see any items on your credit report that are not yours, dispute them with each credit bureau that lists the item. You may dispute items online easily or you may write a letter to each agency listing that item. If the credit agency determines the item is not yours, they will remove it.
  4. Catch up on any payments you are behind on.
  5. Pay your bills automatically and use your budget spreadsheet to ensure all the payments are being processed. If you don’t want to pay bills automatically then set up payment reminders, write the due dates on the calendar, or review your budget spreadsheet weekly. The longer you go without missing a payment, the better your credit score will be.
  6. If your primary goal is to improve your credit score, the typical recommendation is to pay down your credit card balances to reflect less than 30% of the available credit. As Experian explains, “In a FICO Score or score by VantageScore, it is commonly recommended to keep your total credit utilization rate below 30%.” Generally, a lower your utilization rate is better for your credit score. VantageScore recommends an overall utilization rate of no more than 30 percent. However, the lower your utilization ratio, the better for your credit scores.
  7. When you pay off credit cards, you may want to keep the oldest accounts open since credit bureaus often like to see a long credit history.
  8. Don’t open credit accounts you don’t need (if you can avoid it). Generally, too much available credit will lower the amount a lender will approve when you do have a need.

Check back regularly for more tips on how I can help you live richly!

References and Further Reading

Equifax. (2019). How Do I Get My Free Credit Report? https://www.equifax.com/personal/education/credit/report/how-to-get-your-free-credit-report/

Experian. (2019). What is a Credit Utilization Rate? https://www.experian.com/blogs/ask-experian/credit-education/score-basics/credit-utilization-rate/

Stacy Paradise
ABOUT THE AUTHOR

Stacy Paradise

United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization.

The information contained herein is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. GS PFM does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances. Please contact your financial adviser with questions about your specific needs and circumstances.

Information and opinions expressed by individuals other than GS PFM employees do not necessarily reflect the view of GS PFM. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.