What do Santa Claus, the Easter Bunny and carrying-a-balance-on-your-credit-card-to-improve-your-FICO-score all have in common? Hint: fewer people believe in Santa and the loveable furball that fills up Easter baskets. I’m sure you’ve guessed by now that all three are myths but that doesn’t stop a lot of folks from believing in them.
About 43 million Americans believe that carrying a balance on a credit card and paying interest on it boosts your credit score. Yet all three of the main credit reporting agencies (Equifax, TransUnion, Experian) say that this really doesn't factor into your score. In truth, while carrying a small balance won't hurt your score, carrying too large a balance can hurt it, and it's just not a good idea. So what does affect your FICO score?
- Your repayment history (35%)
- Credit Utilization: The amount you owe vs. your available credit (30%)
- The length of your credit history (15%)
- Your credit mix (10%)
- Obtaining new credit (10%)
Rob West and Steve Moore unpack these for us and recommend the best ways to improve your score. Then they answer some listener questions at 800-525-7000 or via email at Questions@MoneyWiseLive.org:
- Is Mom being an enabler by helping her adult daughter and son-in-law by helping them to buy a home in light of a foreclosure?
- Have any of the changes in tax laws made it easier or more difficult for first time home buyers?
- What are the pros and cons of applying for social security at 67 vs. waiting until you turn 70?
- Bought an apartment building and ran up some business debt on credit cards. Sold the building to try to pay off the debt, but some of the card debt has now been turned over to collections. What's the best way to proceed? (Part of Rob's advice included recommending the caller check her credit report at AnnualCreditReport.com)
- Why does your credit score go down when you've had a good score in the past and have been faithful in paying your bills, but have reduced your use of credit in recent years?
- Would it be okay to cut back on one's tithing in order to pay off debt faster?
- How many credit cards should I have?
Rob and Steve also spent a few minutes with MoneyWise resident economist Jerry Bowyer to discuss the recent surge in the US economy. What does that mean for most of us and how should we view it through the lens of a Christian World View?
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