Student
Lesson 7

Improve Your Score

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Your credit can either be:

OR

The benefits of being prime include:

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Low-cost mortgage.
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Front of the line for apartment or home.
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Access to credit cards with great reward programs.
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Not pay any deposits for starting a utility.
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Perks of 800 Club

700 SCORE

  • Solid and good.

800 SCORE

  • Move you to the front of line for:
    • Attractive rental properties.
    • Attractive homes for sale.
  • Dramatically lower the cost of:
    • Mortgages (save $100K+ in interest).
    • Any other type of loan.
  • Allow you to get credit cards with the best reward programs
    • Earn cash back and airline miles at a faster rate (e.g., 1.5 miles vs. 1 mile per dollar).
  • May qualify you for perks such as access to airport lounges and free breakfast in hotels.

Having a strong credit score also shows off that you have dealt wisely when handling worldly wealth. This is a truly good endeavor. Consider the words of Jesus:

“So, if you have not been trustworthy in handling worldly wealth, who will trust you with true riches?” Luke 16:11, NIV

How do we improve our score to get in the 800s?

How Scores are Determined

Payment History

  • Have you paid your bills?

Amounts Owed

  • Primarily a measure of credit utilization (credit used/credit line) : good to keep below 30%; top FICO scores of 800 tend to be 7%, on average.

Length of Credit History

  • Longer credit histories increase the FICO score (people with short credit histories can still have higher FICO scores)

Credit Mix

  • Your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans; very small factor.

New Credit

  • Do not open up lots of new credit all-at-once; lots of credit inquiries also can lower FICO score; if you are shopping for a loan and multiple inquiries are made, all of the inquiries will be dropped if you decide on a loan within 30 days of the first inquiry.

How to Improve Score

DEFENSE

Monitor credit report monthly/quarterly.

  • Make sure no one steals your identity and destroys your credit.

Pay every bill on time

  • Including: utility, dentist, cell phone, rent, credit card, student loan, etc.

Do not open more than 1 credit account at a time.

  • If you do open a new credit card account, wait at least a few months before you open another credit card account

OFFENSE

Keep credit balance low.

  • Your credit balance should always be lower than 30% of your available credit. Keep it lower than 8% if you want to get into the 800s.

Increase available credit.

  • Call your credit card company once-a-year and ask them to increase your available credit. Only do this if your score is already considered good (670+).

Lengthen credit history.

  • If you do not have a credit card, open one and keep its balance at $0 so that you can begin to lengthen your credit history.

Credit Score Video

Activity: Improve Your Credit Score

Complete Activity on PDF Worksheet

Check Score

  • Lots of options (just Google it).
  • A sampling:
  • If you are not “credit visible,” consider opening up a credit card so that you can start building your score.
    • If you cannot get accepted for a credit card, consider opening a ‘secured card’ that will allow you to build credit.
      • Each month, you’ll need to pay your secured credit card bill on time and the payments should be reported to the major credit bureaus to improve your score.
      • Requires a deposit to get started (e.g., $49 for a $200 initial credit line).
      • Very high interest rates (always pay full balance each month).

Shop for secured cards:

https://www.cardrates.com/advice/prepaid-cards-that-build-credit/

Credit Utilization

  • If you have a credit card, download latest credit card statement and look at your credit card balance divided by your available credit.
    • Keep this number below 30% at all times.
    • Keep it below 8% if you want to get in 800 club.

Credit Limit

  • Call your credit card company (or check online) and ask for an increase in your credit limit.
  • Only do this if you have good credit already! (670+ score).
    • If you have bad credit, asking for more credit will likely lower your credit score!

Transition

While it’s good to have a good credit score, is credit itself good? Or does borrowing violate our God-given freedom as we become enslaved (i.e., indebted) to another person?

Next Lesson

Lesson 8