Borrow Better
Borrow Better
Good credit is a valuable tool that enables you to borrow funds to pay for large purchases such as a home, car or college education. If not managed properly, credit can create serious issues including leading people into debt they are unable to repay. Information stays on your report for up to seven years, so the mistakes you make now can prevent you from getting a credit card, auto loan or mortgage for years to come. Establishing responsible habits and maintaining good credit history is key to a healthy financial present and future.
First things first. Know your credit.
Lean how your credit can affect your ability to borrow.
Learn MoreFirst things first. Know your credit.
Know your credit score.
Most creditors use a FICO score (Fair Isaac Corporation) to determine your creditworthiness. Scores range from 300 to 850. A high score indicates that you are financially healthy; a low score indicates a high financial risk. To find out your score, visit www.myfico.com.
Review your credit reports.
You can receive a free copy of your credit report from each of the three credit reporting bureaus each year at www.annualcreditreport.com. You’ll want to thoroughly review each report to ensure that the information listed is accurate.
Get your credit on track.
- If you find an error, report it immediately to the credit reporting agencies and ask them to send out a corrected report to anyone who’s requested one in the past 6 months. For a free sample dispute letter, click here.
- Establish good payment history. Pay at least the minimum due each month and pay on time.
- Lower your debt-to-credit ratio. The bigger the difference between what you owe and your credit limit, the better your score. Pay down your balances and your credit score will improve.
- Maintain credit history. The more history you have, the more creditors have to judge you by.
Borrow within your means.
It’s easy to get caught up in wanting to “keep up with the Joneses”. But taking on more than you can handle will only hurt you in the long run.
- Establish a budget.
Here’s where you determine how much you can actually afford to spend on a monthly payment. Use our worksheet to help you list your current income and expenses. - Determine monthly payments.
Now that you know how much you can afford to pay each month, use one of our calculators to determine how much house, car, etc. you can afford to buy. - Find the right lender.
Shop around. Compare rates and fees; make sure you choose the lender that gives you the best rate you can qualify for based on your credit score. Not sure what questions to ask? The Federal Trade Commission has a mortgage shopping worksheet available at their website. Shopping for a car? Try this checklist from credit.com.
Financial Tip
Pay yourself first.
"Before you spend one dime of your paycheck, take your cut, right off the top. No questions. No excuses. You are the most important creditor you have."
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