Your Credit Score — And How to Improve It
- Steve Diggs No Debt No Sweat! Financial Seminar Ministry
- 2007 6 Sep
In this article I want to cover two important things. First, I want to share two reasons why it’s important for a Christian to have a reasonably good credit score. (By the way, neither have anything to do with going out and borrowing more money!) And, second, I want to show you how to check your credit reports and find your credit scores.
First things first: Why is it important to have a good credit score?
As I said, there are at least good two reasons why Christians should be concerned about maintaining (or, regaining) good credit scores — and neither are to help you go out and get more deeply into debt.
The first thing to know is that practically everybody is checking our credit scores these days. You can bet the next time you apply for a job, the boss is likely to pull your credit info. Insurance companies are increasingly checking their customers’ (and prospective customers’) credit scores. Some experts believe that some insurance companies use this information to help them determine your premium rates. And even the United States military is now pulling credit scores at some of its bases to help determine clearance levels. So, simply put, you need to maintain a good credit score for practical, dollars-and-cents reasons.
Secondly, to some extent, our credit scores are a reflection of our character. As Christians, we should be honorable people — people of good character. This is part of our witness to the outside world. Sadly, many bankers will tell you that preachers are notoriously bad credit risks. This is a black eye for the Christian world. If you wear the name of Christ, you are an ambassador for Christ. And, as his ambassador it is important to reflect truth and integrity.
The Bible tells us that “The wicked borrows and does not pay back” (Psalm 37:21a). And the Proverbs tells us that, “A good name is to be more desired than great riches, favor is better than silver and gold.” The bottom line: Christians reflect Christ best when they pay their bills and have credit scores that reflect that fact.
How to check your credit reports and find your credit scores
Most people are confused about credit scores and credit reports. There is an important difference between the two.
Your credit report is kept primarily by three major companies: Experion, TransUnion, and Equifax. These three firms collect data from all sorts of sources, primarily companies that have extended you credit. They maintain huge data banks of information on you. You need to check with these companies and make sure that what they have on their reports is accurate.
A couple of years ago, the federal government passed new legislation that now requires these three companies to give you a free copy of you credit information once a year. You can go to the various company websites, or to www.annualcreditreport.com to get your free credit reports.
NOTE: Here’s a strategy: Consider not requesting all three reports at one time. Instead, consider requesting one from each of the three companies every three or four months. This way, if someone is messing around with your credit (i.e. identity theft) you may be more likely to catch it than if you only check once a year.
What’s the difference in my credit report and my credit score?
I’m glad you asked. A lot of people are confused about credit reports and credit scores. Your credit report is what we have just been discussing. There are three of them (usually all fairly similar, but with some differences) maintained by the three companies I just mentioned; Experion, TransUnion, and Equifax. These reports are just that. They report your credit activity and history.
Your credit score is different. As a matter of fact, until recent years our credit scores were a carefully hidden secret, usually available only to lenders and other credit professionals. This was bad because it put the consumer at a real disadvantage when applying for a loan. As a consumer, if you didn’t know your credit score you didn’t know why you were being denied a loan, or if the rate they were charging was fair. And, you certainly didn’t have enough knowledge to be able to bargain very effectively.
These days things have changed. It is now easy to get your credit score. But, it can still be confusing. Your credit scores are determined and maintained by an organization named the Fair Isaacs Company—FICO for short. FICO takes the information from the three credit scoring companies (Experion, TransUnion, and Equifax) and mixes it all together with a concoction of their own to develop your credit scores. I say “credit scores” because they actually have three credit scores on each of us based on the info from each of the three credit reporting companies.
Credit scores range from a low (bad) of 350 to a high (super) of 850. While practically no one is at either end, its fair to say that anything under 600 needs work, and anything over 720 is pretty good. (The national average score is about 675.)
If you want your credit score information you can go to www.myfico.com and get all the information. Warning: This won’t be free. FICO charges for this info. You can select one of the three scores (based on the data from whichever credit reporting agency you prefer) for under $20. Or, if you want all three scores (based on the information from all three of the credit reporting agencies, that’ll cost you just under $50.)
One more little warning. Today some of the three credit reporting agencies are trying to get into the act by developing (and selling) their own credit scores. Some experts feel that these are not as important to know as the FICO credit scores are since many lenders still lean towards the FICO scores when considering your true credit risk.
The FICO website offers a bucket-load of information on how to improve your credit scores. This is important especially if you’re considering borrowing money (i.e. for a home) as the higher your FICO scores, often the better your interest rate.
Steve Diggs presents the No Debt No Sweat! Christian Money Management Seminar at churches and other venues nationwide. Visit Steve on the Web at www.stevediggs.com or call 615-834-3063. The author of several books, today Steve serves as a minister for the Antioch Church of Christ in Nashville. For 25 years he was President of the Franklin Group, Inc. Steve and Bonnie have four children whom they have home schooled. The family lives in Brentwood, Tennessee.
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