Many people, especially in my age group where we are trying to break out of the poor financial habits typical of someone in their early 20s and build an adult life with things like a house and a car, are worried about their credit score. Maybe you are concerned about your standing after the Equifax hack last year, or maybe you are trying to start your own business and would like to get a loan. Regardless of motivations, someone trying to gain control of finances or looking to enhance their equity will inevitably want to take a look at their credit score.
Checking your score every once in a while is a good thing to indicate what steps and plans you will need to make. Low credit scores are not the end-all-be-all of your life, they may make getting loans or mortgages hard at the present, but there are steps you can do to improve your score that will set you up for better success in the future.
When I was 14, my dad, who is a now-retired Financial Planner and CPA, had me take a credit card out in my own name which he cosigned, and once a month I’d make a small purchase with it, weather it be a coke or a candy bar or a piece of sporting equipment, it was something small that I would immediately pay off with my allowance money, and by the time I graduated college, I had a credit score in the mid 700s. While you need to use credit to increase your score, there are ways and plans that if one lives within their means while not completely avoiding credit, they can improve a subprime or average score.
While everyone is allowed one free look annually at their credit score from each of the 3 credit agencies, Equifax, Experian, and TransUnion, every time you take a look your score takes a dip. This is why it’s best to either request a copy of your credit score when another person or agency is already planning to take a look, or to try one of the alternative websites online.
I did an experiment over the past 3 years since I moved to Colorado. I was highly curious about the obnoxious commercials you’d find all the time on television and radio about CreditKarma. So, when I moved to Colorado and applied for a townhouse in Boulder, I requested the rental agency provide me a copy of the credit report they ran on my application, and they gave me a photocopy when they approved my application. I took a look at it, and ran a search on CreditKarma, which as it advertises, is a free service that does not effect your score when they take a look, and all 3 agencies reports along with CreditKarma were within a 5 point range of each other. I did this again when I moved to Denver and my second apartment complex provided me a copy of my credit report. CreditKarma was within a 3 point range of the 3 different bureau’s reports. When I moved to my current place in November, I again did the same comparison and it was again all within a 5 point range. So I am confident that CreditKarma, while not exact, was so close in range to my actual scores that it was a very good indicator of where I was standing.
I encourage everyone, especially younger folks who might be reading my blog, to take a look at their score, and use a free service like CreditKarma to get an idea of where you are, and try to use that score as a starting point to build a solid financial plan in order to be able to afford and achieve your goals in life. It takes time and conscience effort, but anyone can improve their credit situation regardless of their past as long as they are willing to commit to a brighter future for themselves.