Credit Scores
Your credit score. You have probably heard of it, and even if you haven’t, you still have one. Bad or good, it’s out there somewhere, but what exactly is it, and is it actually that important? Although there are numerous credit scores and scales that lenders employ, we will concentrate on the most trusted and widely used, FICO. FICO is an abbreviation for Fair Isaac Corporation, and your FICO score is simply where you place on a scale from 300-850. It essentially measures your previous ability to pay back debt and is like a report card of your credit history. Banks and lenders use your credit score to help determine whether or not a loan will be approved, its interest rate, and its duration. Some insurance agencies use credit scores to adjust premiums as well, so having a good FICO score can be a good thing.
But what about me? My credit score is probably horrible! First of all, remember that your FICO score is only an indicator of how have you done with debt in the past; it will not tell you if you can be financially successful in the future. Remember that your financial success is NOT dictated by your previous debt history. Even though there are benefits to having a higher credit score, like a lower interest rate on a loan, there are many other aspects that lenders consider when looking at a loan, such as how much you make, your income-to-debt level, and progress you’re making now with your finances. Secondly, your FICO score is weighted by time. In other words, it gives less importance to past performance and greater importance to recent performance. So, the choices that you make now will influence your score more than past ones. After seven years, almost everything is removed from your credit report, including dismissed/completed Chapter 13 bankruptcies. Chapters 7 and 11 bankruptcies can stay on for up to an additional three years. So stay strong in your commitment to pay off debt and don’t become sidetracked by credit scores. The best way to increase your credit score is to keep current with all your accounts and pay down what you have. Most importantly, you should never seek out new credit in order to repair your credit score. That will only make it harder to pay down your debt.
If you are curious about your credit score, you can find it online at MyFICO.com for a small fee. If you want to obtain a credit report that details your credit history, but does not contain your credit score, you can, for free! If you are really ambitious, you can even get one free credit report each year from each of the three nationwide credit reporting agencies (Experian, Equifax, and TransUnion) at AnnualCreditReport.com. Many other websites claim that they can offer free credit reports but will then charge fees for other services that come with your credit report, so be careful if you go to another website. Although these reports will not include your credit score, they are helpful in keeping a good record of your accounts and making sure that only you are taking out credit in your name.
Remember that you credit score is not a measure of financial success and you should never be anxious about it. Your choices financially and spiritually are far more important than what your credit report says. God calls us to be debt-free so we can fully accomplish God’s best for our lives (Romans 13:8, Luke 8:14). Our end goal is not to attain wealth, but to use all we can for God’s glory (Matthew 5:40-42, Matthew 6:19-20). So stay strong, be encouraged, and be well-informed about the financial environment we live in.
John Antoine
