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Improving Financial Literacy: Tips for Keeping a Good Credit Score

Monday, April 6 2015 12:00am

Tags: Finance

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By Harry W Greenfield
Glidden Visiting Professor
Partner Buckley King
Cleveland, Ohio

YOUR WALLET — How does one get and keep a good credit score?  "Credit is the ability to borrow money from a financial institution, based on the institution’s confidence in the borrower’s ability to repay the debt." 

Every person who has credit has a "credit score."  The base credit score is calculated by Fair Isaac Corporation (FICO).  That FICO score is then adjusted, depending on the requirements of the credit grantor and the information in the credit grantee’s file at the credit reporting agency.

 There are three credit reporting agencies: TransUnion, Experian, and Equifax.  Each of these agencies allows you to apply for one free credit report annually, so you have the ability to get three credit reports each year at no charge.  Go to www.annualcreditreport.com to apply; I suggest that you apply for one report every 4 months, and make sure you get your FICO score — it is used by most credit grantors.

The rules to keep a good credit score are pretty simple to follow:

  • Pay your bills on time every time.
  • Don’t get close to your credit limit .
  • A long credit history will help your score.
  • Only apply for credit that you need.
  • Have a second, backup credit card, so you don’t get near your limit on one.
  • Do not apply for other credit 90 days before applying for a car loan or a home mortgage.

 Having good credit will save you thousands of dollars in interest charges over your life.  It will make getting a car loan or a mortgage easier.  Employers and insurance companies check credit reports so it can even help you get a job or a promotion.  Be smart when using credit.  It will be to your benefit in the long run.