REVIEW THESE 5 SIMPLE ACTIONS TO ENSURE OPTIMAL CREDIT SCORES
Did you know August 14 is National Financial Awareness Day? United Way of Broward County hopes you’ll use this day as a reminder of how important financial planning is for your and your family’s future.
Having financial prosperity and financial literacy are important to everyone’s overall peace of mind, and making sound financial decisions today can make a huge difference for the future. National Financial Awareness Day is a great time to review where you are now, where you’re going financially and then take action if needed. We know the numbers may be a jolt for some, but it’s better to face the facts — remember knowledge is power!
If your finances are not as strong as you like, you would not be alone:
- 58% of Americans have less than $1,000 saved.
- $2,000 is the average emergency savings of a millennial.
- 50% of American households are living paycheck to paycheck.
- 44% of Americans are unable to cover a $400 emergency.
You can make financial decisions now that can reverse any concerns or troubles you have. Our United Way offers a resource center with a variety of educational materials that can help you reach your financial goals. Plus, here are 5 simple, proven actions that will support your financial well-being:
1) Check your credit frequently — Monitoring your credit score is a good way to keep track of your progress AND spot potential issues and address them before significant damage occurs.
2) Pay Your Bills on Time — Late payments can remain on your credit report for seven years. While the impact on your score may diminish over time with new positive information, it still can hamper your credit growth the entire time it’s on there.
3) Don’t Apply for Too Many Credit Cards — Almost every time you apply for credit, the lender runs a hard inquiry to check your credit report. When you apply for multiple credit cards in a short period, each inquiry will count against you. Multiple inquiries can have a compounding effect on your credit score and cause creditors to view you as a riskier borrower.
4) Eliminate Unnecessary Credit — Unnecessary credit can put a strain on your budget, making it more challenging to keep up with your monthly payments and more likely that you’ll miss a payment. It’ll also increase how much you owe — which also could have a negative impact on your credit score. The simple solution is to only apply for credit when you really need it. This way, you’ll avoid paying interest charges unnecessarily and stretching yourself too thin financially.
5) Keep Your Credit Card Accounts Open — When you close an account in good standing, its history can remain on your credit reports for up to 10 years. By closing these kinds of accounts, you could hurt your credit score, at least temporarily. When you close a credit card, you lose its available credit, which could cause your total credit utilization rate to increase. Also, your credit score no longer will benefit from on-time payments over time, which won’t necessarily hurt your credit score, but it could impede its growth.
How is a credit score calculated? The FICO Score is based on five different factors:
- Payment history (35%) — This component shows your ability to make on-time payments and avoid delinquent and collection accounts. The more positive your payment history, the better your score.
- Amount owed (30%) — This factor includes the total amount you owe as well as your credit utilization ratio, which is the percentage of available credit you’re using on each credit card and across all of your credit card accounts. The lower your credit card balances relative to their limits, the better it is for your credit score.
- Length of credit history (15%) — This element takes into account both how long you’ve been using credit in general and the average age of all your accounts. As a result, avoiding unnecessary borrowing and using credit over time are both positive factors.
- Credit mix (10%) — This credit factor considers the different types of credit accounts you have, such as credit cards, student loans, mortgage loans, auto loans and more. In general, your credit mix won’t affect your score much unless your credit report doesn’t have a lot of other information to use to calculate your score.
- New credit (10%) — Every time you apply for credit and a creditor runs a hard inquiry on your report, it could knock a few points off your credit score. If you apply for multiple credit accounts in a short period, it could be a red flag to potential lenders.
What is a good credit score? Here is a general outline of how to measure your FICO Score:
- exceptional — 800 to 850
- very good — 740 — to 799
- good — 670 to 739
- fair — 580 to 669
- poor — 300 to 579
Help with your credit score and financial literacy is available, including free resources in Broward County. These resources provide free financial education and credit counseling services. These organizations can tailor solutions for you to avoid debts that cannot be repaid, establish financial plans and budget, negotiate with creditors to establish a payment and understand options for better financial management.
1) Consolidated Credit
Address: 5701 W. Sunrise Blvd., Fort Lauderdale, FL 33313
Open: 7 days per week
2) Hispanic Unity of Florida
Address: 5840 Johnson St., Hollywood, FL 33021
Open: Monday through Thursday, 9 am to 5 pm
3) Urban League of Broward County
Address: 560 NW 27th Ave., Fort Lauderdale, FL 33311
Open: Monday through Friday, 8 am to 6:30 pm
4) Arc Broward (only for adults with disabilities)
Address: 10250 NW 53rd St., Sunrise, FL 33351
Open: Monday through Friday, 8 am to 5 pm
Getting smarter and making changes about your financial health and your future definitely is achievable. Contact one of these free resources above or check out our financial resource center to make sure your credit score is as strong as possible and to understand what you may need to change for the best results.