The key to getting ahead in this country used to be an education. Absent even that, at least what a person had done in life, what they had actually accomplished was what counted. These days however, it seems that the only true mark of achievement that makes any real difference one way or another is, unfortunately, the almighty "Credit Score." 
Even today, during the so-called "lending crisis," there are "Stated Income" loans available where virtually the only requirement is a minimum credit score. Forget what that person does for a living, how long they've been doing it, what kind of money they make, or even if they have a job in the first place; if your credit score is high enough, you can probably get a loan.
On the other hand, even a Pulitzer Prize winner or a Nobel Laureate's loan application could be rejected if their credit score didn't measure up. That, to me, is pretty astounding. Some would argue however, that the system set up by the Fair Isaac Corporation (they were the first to come up with the so-called "Credit Score") is a fair and equitable means of determining credit worthiness, by considering the most relevant facts while disregarding other variables which might be considered extraneous.. like what you've accomplished in life.
Oh brother.
I guess even my client's Nobel Prize might be considered extraneous if he had a recent bankruptcy so the best lesson to be learned from all this is to protect your credit score at all times!
Lets look at what can be done to Improve Your Credit Score:
Check you credit via one or more of the three predominant Credit Agencies, Equifax, Experian and Trans Union often. If you haven't checked recently, you might find errors that are hurting your score. Each agency provides a place on their website where you can register a dispute. Use it.
Don't close old accounts that you're not using. Long histories, regardless of activity help your credit score.
Pay your accounts on-time. Even one incidence of over 30 days past-due can hurt your score dramatically.
Keep a small balance on your credit cards while guarding against keeping high balances relative to your credit limit. A small balance, believe it or not, is better than a zero balance. A general good rule of thumb is never to exceed a balance that is more than 30% of your credit limit.
If you run into a bind (illness, loss of job etc,) call your creditors before you get behind in order to work out a payment plan.
Checking your own credit often (a soft pull) won't hurt your score. However, if a lot of outside companies do too many checks, too often, this can hurt your credit. Don't apply for credit to a lot of creditors at once. If you're buying Real Estate, what ever you do, don't buy that new car until your transaction has closed escrow!! Many a deal's been killed by people who bought "furniture for the new house" at precisely the wrong time. Remember, that your lender might pull credit one final time before funding the transaction. (or not)
Consider getting a "Secured" credit card to establish credit. This kind of account is secured by a deposit placed on account with the issuer.
Don't apply for too many credit cards that you don't need. Having a lot of credit availability can actually hurt your score.
If you've been a good customer over the years, ask to have that one payment that you made late erased from the record. You'll be surprised what you can sometimes get by simply asking.
Don't ever ask a creditor to LOWER your credit line. The result of that will increase your debt to limit ratio, which hurts your score.
Resist the temptation to consolodate accounts into a single card, even if its at a much lower rate. The idea here is to maintain low balances on your cards instead of a high balance (relative to limit) on just one.
There's a part of me that thinks it's a little sad that the measure of a person's reliability and almost by implication, their worth to society, can be sythesized into a single number; but like it or not, in our society today the almighty FICO score apparently reins supreeme. Making sure that "score" is protected is an essential componant of modern survival.
Comments(12)