The Amateur Financier

(Ah, the credit score.  The one (well, technically three) score(s) that can determine a surprisingly large portion of your life, or at least how much you’ll pay to live your life the way you want.  Luckily, there’s plenty of good advice on how to keep your credits score as high as possible, including the following advice from Ed O’Brien.  Thank you much, Ed!)

Many people don’t realize until it’s too late that having a good credit score helps save money. More and more businesses are basing their application approval and rates on your credit score. If you have a good credit score, you have a much greater chance at getting the best rates and the lowest prices on certain goods and services. On the other hand, people with bad credit scores pay higher prices and more interest.

If you’ve been putting off improving your credit score, these are some of the ways you’ll save money.

• Get lower interest rates. Credit card and loan interest rates are based on your credit history. If you’re on the market for a mortgage, a better credit score will reduce your monthly mortgage payment.

• Lower your cost of education. Banks that offer private student loans check your credit to approve the loan and assign your interest rate. If you take out a private student loan to pay for your college education, your interest rate will be higher than if you had a better credit score.

• Lower your insurance rate. Insurance companies base your premium partly on your credit history. Drivers with a lower credit score will have higher premiums.

• Pay less for transportation. Auto lenders are another company that charge higher interest rates on loans for people with lower credit scores. If you have to take out an auto loan with a bad credit score, you’ll pay more interest on the loan and ultimately more money for your car.

• Eliminate security deposits. When you establish certain types of utilities in your name, like electricity or water, a bad credit score will require you to pay a security deposit on the service. Companies keep the security deposit until you’ve made timely payments for several months or until you disconnect service.

• Qualify for a better job, raise, or promotion. Employers don’t check credit scores, instead they check your credit report, which your credit score is based on. Some credit blemishes can get you turned down for a job or salary you’ve always dreamed of.

How to Improve Your Credit Score

If you want to start saving money on credit cards, loans, and other services you need to improve your credit score. Start by checking your credit report and score. You can order a free copy of your credit report from AnnualCreditReport.com. This free credit report is available once a year. CreditKarma.com offers a free credit score from Experian and you can update it as often as you’d like. You’ll generally have to pay to see your FICO score at myFICO.com, the score most lenders use.

• Dispute credit report errors. Review your credit report to make sure everything on it is accurate. If you find errors, dispute them with the credit bureau that provided your report. If that doesn’t work, talk to the business that reported the information.

• Ask the creditor for a favor. If you have negative accounts that have already been paid, as the creditor to remove the account as a courtesy. Try to get the name and number or address of a specific person in the company to get better success.

• Pay up past due accounts. If you have accounts that are in danger of being charged-off, bring them current before they become 180 days late. After that time, the account has done serious damage to your credit history.

• Pay for a delete. Another tactic to remove negative entries from your credit report is to ask the creditor to delete it in exchange for payment. You can write a letter making your request and send it to the address your creditor has for correspondence. It’s even better if you can get the name and direct address of someone in the company.

• Leave well enough alone. Most negative information hurts your score less as it gets older. Harmful information falls off your credit report after seven years, or 10 years for bankruptcy. If something is on the verge of falling off your credit report, leave it alone. Then, decide whether you want to pay it after it’s no longer on your report.

Improving your credit takes some time and effort, but the effort is worth it considering how much money you’ll save in the long run with your good credit score.

Ed O’Brien is an expert in personal finance, specializing in credit repair. You can find more of his articles on his blog, CreditRepair.org.