Personal Finance guide

First, let’s take a look at just precisely what your credit score is.

Your credit score aka FICA score is a number selected by the big three reporting bureaus, namely TransUnion, Equifax, and Experian. Your credit score number will be between the low of 300 and the high of 900. If a credit score is 650 or higher, this is considered a good credit score and should help you qualify for top rates when trying to obtain a loan.

Is your credit score less than 650? If so, you really need to try to raise it! Why? Justimproving your credit score by only 100 points (easy enough for most of us) can save you a whole lot of coin! More about improving your credit score in just a minute.

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Excellent credit begins with how well a consumer handles all financial aspects of life. Responsibly managing a mortgage, credit cards, auto and personal loans and even their cell phone service will add depth to an individual’s credit history and increase their credit score. Credit scores influence whether a loan or line of credit is approved, the higher the score the better the chance of securing a mortgage, loan or credit card.

One common misunderstanding of establishing excellent credit is that zero balances on your credit accounts will earn an excellent credit score. Lenders want to know that you can actually manage your account and, as grand a gesture is of paying off the balance every month, it doesn’t convey the ability to handle debt in the midst of financial uncertainty. So, even if you have the financial stability to pay off the balance, allow one or two accounts to carry a small balance each month.

Good credit comes from handling a variety of loans and credit accounts, not only how you manage revolving credit card debt. It’s also affected by how you handle fixed payments, like your car and mortgage payments. But when it comes to credit cards, there are several points that need to be addressed to help secure a healthy score and credit history:

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Thanks to Federal laws and credit card company policies, losing your credit cards doesn’t mean extensive losses to your bank account or damage to your credit score. Federal law caps your liability at $50 in such an event, but most credit card companies have a $0 liability clause, if you call within 24 hours of the loss. If a thief uses your card before you report it missing, the most you will owe for unauthorized charges is $50.

If you report the loss before your credit card is used, the card issuer cannot hold you responsible for any unauthorized charges. And if you report fraudulent activity within 60 days from the first billing statement it appeared on, you won’t be responsible for any of the charges above $50. Also, if the loss involves your credit card number, but not the card itself, you have no liability for unauthorized use.

But it’s critical that you report the loss or theft of your credit card to the card issuers, as quickly as possible. And remember, it’s much easier and less traumatic to cancel a card that you find later in the week, then to risk the hassle of a thief running amok with your credit card and racking up thousands of dollars of debt on your account.

If you notice questionable charges on your statement, call your credit card company immediately to begin an investigation. Many companies have toll-free numbers and 24-hour service to deal with such emergencies. Pick up the phone and contact the fraud department of your credit card company and be prepared with your account number and when you first noticed your card was missing. Be sure to get the name of the representative you speak with and any reference numbers that may apply.

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Using a high interest credit card is like throwing money down the drain! If you’re wasting money with a high APR, you should consider applying for a low interest or 0% APR credit card instead. Although your credit score will ultimately determine your interest rate, apply for a lower APR and you could save a ton on interest charges. Here’s an example of how much you can save just by reducing your current APR:

Your current credit card has an APR of 14.99%. But you’ve been pre-approved for a credit card at 9.99%. Over the course of a year, you could save 5% on interest charges. How does this add up?

Save with a Low APR:

Assume you have a balance of $5,000 on your credit card:

OLD CARD: 14.99% = $ 749.50 per year in interest charges

NEW CARD: 9.99% = $ 499.50 per year in interest charges

In this example, you could save up to $250 per year! If you had a balance of $10,000, you could save twice as much! This extra money could be used to pay down your current credit card balances or used to make cash purchases and avoid increasing your existing credit card debt.

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