Saturday, February 18, 2012

Increasing Your Credit Score

My husband and I set a lot of goals for ourselves this year, two of them being large purchases. We decided at the beginning of 2012 that we were going to purchase a new van AND a new home back in town. (I have decided I just wasn't made for the country!) When I met with a financial advisor for the first time, she gave me so much valuable information. We have NEVER monitored our credit scores which I found out was a big mistake. She also taught us how the whole credit report thing works and explained the factors that help and hurt your credit. I never realized that having someone pull your credit (called a hard inquiry) HURTS your credit! We told her we had planned on buying a new van and she also explained how this could potentially kill your credit score. When you go to buy a car, often times they will submit your information and several potential lenders will pull your credit report. This results in multiple hard inquiries on your account which subsequently drops your score.

The very first thing we did when we got home that night was order our credit report! It was free and we wanted to see exactly where we stood.  We knew we had good credit but had no clue exactly what our score was and the financial advisor told us that monitoring your own credit does not hurt your score so we figured this was probably a good idea.  There was nothing that really surprised me on our report until we got to the section of "Judgements, bankruptcies, liens, etc." I was shocked to see a negative judgement in there for an error in our school taxes from a loooong time ago! It was only for $114 which we would have taken care of immediately if we had known it even existed! I immediately started making phone calls until I found out what it was, took care of it and now we just have to wait for them to remove it from the credit report. Turns out, they had an old address on file so we never even got the paperwork stating the error so we never knew we owed the money. Had we been monitoring our credit score, we probably could have taken care of that much sooner, especially since it was from all the way back in 2006!!!  The things in this section of your credit report can really hurt you when trying to make purchases on credit so not knowing what's here really does hurt you!

We started monitoring our credit from that point on and I continue to run our credit report daily, watching for discrepancies and checking our score. The lady we are working with from the mortgage company told us easy ways to increase our score so we can get the lowest interest rate possible. We could buy a new house right now if we really wanted to but if we wait 3-6 months, we can get the lowest interest rate possible which is really important to us. We got another credit card per her advice. One of the things she told us was to never max it out and always pay it off each month. So we are using that card for purchases like gas and groceries and after we get about halfway to the credit limit, we stop using it for the month. After paying on this new credit card for just a few months, we should see a good increase which is good because we did end up buying a van and the advisor was exactly right. We shopped around and went to a few different places before we finally decided on a van and we ended up with 4 hard inquiries on our report which dropped our score 12 points!!!!  I guess she did know what she was talking about :) I love our new van though and it was so worth it, even if it pushes buying a house to later in the year. So glad we met with her though. Do you monitor your credit? You can get your free credit score at places like freescore.com so you can see where you stand. I wish we had done it sooner but I guess better late than never! We might end up having to rent a house in town for a few months but in the end, we are going to have our dream home with the lowest interest rate possible and I think it's probably better to wait, even though we really don't want to.  I know it's the best thing to do for our financial health!!



*This post contains sponsored links but the writing and all opinions are my own*

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