May 21



Applying for student loans?  Worried about your credit score?  Here are 5 steps you can take today to improve your credit score.

At this time of year, many parents start scratching their heads and turn to their keyboards to search for answers to their pressing financial questions.  Parents, reeling from the sticker shock caused by their son or daughter’s college acceptance and award letter are trying to figure out how to pay for college.  Students are asking questions about credit, many for the first time.  Want to guess the financial question Google gets asked the most?  It is “how do student loans work?”  No wonder.  According to a recent Marketwatch article, Americans are trying to figure out how to deal with $1.4 trillion in student loan debt.  A study conducted by Liberty Bank for Savings found Google gets an average of 2.4 million searches per month from folks looking for the answer to this question.

Financial Literacy

Unfortunately, most schools do not offer financial literacy courses.  Many people grow up with a less than basic understanding of how debt affects their financial well-being.  So today I will shed some light on one of the fundamental pieces of the debt puzzle – the credit score.

What is a Credit Score?

A Credit Score is a number that is calculated by evaluating your personal credit history.  It is one component lenders use to determine your ability to repay debt.  A low credit score number reflects a high credit risk, and a high number reflects a low credit risk.  Usually the scores range between 300- and 850.  There are many factors that determine your score.  If a person has never borrowed money, most likely they will have a score that shows “no credit” or “no credit history”.  This is viewed differently than “poor credit”.  A person with a “Poor” credit score is someone that borrowed money and either did not pay it back, or didn’t pay on time.

credit scoreWhy Is Your Credit Score Important?

There are many times when decisions will be made on your behalf based on your credit score.  Employers are reluctant to hire someone with a low score.  Landlords are less likely to rent to someone with a low score, especially if they own property in an area with limited apartments.  Lenders are less likely to give you favorable terms if they are willing to lend to you at all.  Put yourself in the shoes of an employer for example.  You have a choice between a candidate with a strong credit score and someone with a poor score.  Assuming everything else is fairly equal, which person would you want on your team?  Someone that demonstrated responsibility by meeting an obligation, or someone that didn’t?

5 Steps To Take To Improve Your Credit Score

1)  First, keep a close watch on your credit report and FICO scores.  Check all 3 major credit bureaus.  A personal inquiry does not impact your credit score, it is referred to as a “soft pull”.  Your goal should be a score of 700 or better (650 is often acceptable, but not always).  If you need to raise your score, do these things:

2)  If you have consumer credit, like credit cards, make sure your outstanding balances are below 50% of your available credit.  For example, if you have a $5,000 limit and you owe $3,000, it has a negative effect on your FICO score.  Make payments to get your outstanding credit below $2,500.  This will improve your score.

3)  When you check your credit report, look for any open credit cards or lines of credit you are not using and close them.  Too much available credit can lower your score.

4)  Make sure your report is accurate.  If there are any “dings” or errors, get them cleared up immediately.  Accurate data will help improve your credit score.

5)  If you have questions about your credit, speak with a Certified Financial Planner.  Many will help for a low fee or maybe even give a free consultation.  Developing a strategy to improve your credit score can save you hundreds if not thousands of dollars.  Spending a little time and money with a professional can help eliminate the stress caused by poor financial decisions.  Just imagine how much better you will feel, knowing you are moving in the right direction!

Previously published by Harness Magazine at

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