The Truth About Your Credit Score

For a lot of us, our lives all seem to boil down to numbers. We analyze our status and make decisions based upon how much money we earn, how much we’re saving for retirement, how many years we plan to work before retiring, the interest rate on our mortgages, and so on.

One of those important numbers is your credit score. The good news is that you have a lot of control over your score, but the bad news is that a variety of factors can impact it. Since your credit score affects other parts of your life such as your mortgage and even auto insurance rates, it might help you to understand the types of things that can impact it.

Late bill payments. You probably already know that late credit card payments will impact your credit score, but even surprising things like unpaid library fines or parking tickets can end up on your credit profile if they are reported by the creditor.

Taxes. Taxes are like any other bill. If you fail to pay the bill on time, your state or the federal government can file a tax lien against you. This might drop your credit score by as much as 100 points.

Asking for credit. Simply applying for a cell phone plan, a car loan, or a new credit card can drop your score by about five points. Even requesting a credit line increase from your current card company can impact your score this way, so be careful about making too many request (or “inquiries” as they are known in the industry). A temporary score drop is usually no big deal, but avoid unnecessary inquiries if you’re actively trying to obtain something important, like a mortgage.

Those are some of the major events that can make a dent in your credit history, but certainly not the only things that can cause issues. It’s smart to be diligent and careful with all matters concerning your credit.

Protecting your credit score is the best way to access lower mortgage rates, and credit cards with low rates and extensive reward programs. A good score can even help you nab a better deal on things like car insurance. So take care to protect it, and remember that saving money this way helps you avoid debt and better prepare for your financial future.

And remember, schedule regular appointments with us to discuss that financial future. We can guide you through decisions that help you achieve a more stable retirement one day.