Monday, July 18, 2011

Credit Scores 101

Earning a good credit score can be easy if you always pay your bills on time. It's OK to pay them on the exact due date, but anything afterwards, and you risk your credit rating.  Of course to earn a credit score, you have to have credit and use it. Amazingly, if you operate on a cash-only basis, you may have a very low credit score, even though you pay your bills on time. 

Your credit rating is also referred to as a credit score. Many factors make up this score, but it all boils down to managing your money wisely, knowing your exact due dates on all bills, then making sure your payments are there on time.  You can also check your free credit score

If you use good old fashioned mail to pay your bills, you can address your envelope the day you receive your bill. Then where the stamp is supposed to go, just pencil in the due date. Generally you will need to get your check in the mail for USA bills 3-5 days ahead of the due date. You can then file your bills to be paid, in their addressed envelopes with the closest date at the front. That way every time you get paid, you can sort through the bills that are coming due, to make sure they are paid on time. The stamp will cover up the date you penciled in, once you are ready to mail the check off. 

Many banks have online bill paying that lets you choose when to pay your bills. To have the highest average collected bank balance in your checking, pay your bills on Mondays, not on Fridays. You can just date your payments to go out on Mondays, but make sure it's on or before the due date of the bill. 

The way your credit score is determined varies from bank to bank, but basically they take into account your current credit obligations and how you manage them. Things like owning a home can add to your score, but if you  have lots of late payments, this can subtract from it. Most financial institutions keep their formulas top secret.  Some have higher limits for issuing credit, others have lower limits. 

Hurricanes and Hangovers and Other Tall Tales and Loose Lies from the Coconut Telegraph by Dear Miss Mermaid

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