Maintaining a good credit score is an important part of financial health. It is frightening, then, to realize that 14% of Americans do not know their credit score or didn’t know they had a credit score (Source: Consumers & Credit Scores: Understanding Consumer Confusion to Target Solution.)
Unfortunately, many people learn about the importance of their credit score at the precise moment when they need it for a large purchase. This was the case for Michael, a 22 year old Activehours user and Apple Store employee in Dallas, TX.
When he first got out of high school, Michael got a credit card to build his credit. He felt good about his finances and continued to grow his credit through college. However, he never monitored his credit score.
During this time, his parents were going through a separation. As their marital trouble translated to financial trouble, his mother was pushed to take out a loan in her husband’s name. Her husband agreed to handle the payment. Unfortunately, since Michael shares a name with his father, his mother accidentally used Michael’s social security number for the $5000 loan.
Michael’s father monitored his own credit regularly. Since he never saw a loan come up on his report, he didn’t make any payments. In the meantime, since Michael wasn’t monitoring his credit score, he had no idea that it was being ravaged by this accidental loan.
It wasn’t until he went to buy a car that Michael realized what had happened. By this time, his score, which he had just begun to grow in the past couple years, had dropped 200 credit points. It took a year and a half to rebuild his credit. Now, Michael vigilantly checks his credit score once a week and his credit report every three months.
Even though his credit slip-up was caused by a miscommunication between his parents, Michael still ultimately had to pay the price for it. Financial health means being proactive about monitoring, not only your spending, but also your credit. With that in mind, here are 6 Tips to Better Financial Health and Higher Credit:
- Make a budget by tracking everything you spend.
- If you move, check the mail at previous addresses and update your info with every account you have. Or switch to paperless billing so you don’t miss anything.
- Don’t buy something until you can afford it with cash.
- Check your credit score regularly: Credit Sesame shows your credit score and report for free.
- Set tangible goals for the future and work towards them using a budgeting app like Mint.
- Use an app like Activehours to pay for credit card bills on time and to make sure your budget has wiggle room for unexpected expenses before payday.
Taking the time to understand your credit score and monitoring it regularly are key to having good financial health. With these tips and tools, keeping a pulse on your credit can be easy.