Saving Money With Your Credit Score {And A Personal Journey}

When I was 18, some of my friends and I would go shopping and apply for all the store cards we could.  We would then go on lavish shopping sprees where we would then max out our cards, not caring about what the “minimum payment” would be.  What the heck were we thinking!?! The ironic part – two years later, I started a 10 year career in…banking.

Who on earth was I, the-girl-with-maxed-out-credit-cards, to help others handle their money?  I truly related to Sophie Kinsella’s Shopaholic , Becky Bloomwood {btw, I’m currently reading Mini Shopaholic}, and honestly, I still do relate a little bit.  While I am married now, and no longer have any credit cards in my name (whoooohooooo!), DH has some cards that we are desperately trying to pay off, so I’m not in the clear, yet – “what’s mine is yours and what’s yours is mine!”  Oh yeah, and my student loans (ugh).

But back to my story.  Mind you, when you turn 18, usually that’s when you start to build your credit.  Well, lemme tell ya, not only did I build it, but I used a bulldozer to knock it down.  Down to the 400′s.  Yes, my score was that low, folks.   I remember trying to apply for a consolidation loan to get myself out of that mess, and was almost in tears when I was denied, flabbergasted that I didn’t get approved!.  I tried to explain, “But, I need this loan to payoff off all my other loans and I promise promise promise to pay it back and not rack it back up.  Isn’t that what a consolidation loan is for!?”  Didn’t she get it!?!  That was the point!  But that loan officer was not convinced and was not even about to put her butt on the line for my little shopping addiction.

Fast forward six years, and I was then a loan officer myself.  Thankfully, I had paid off and closed most of my cards, and even scored my first auto loan by myself (still at a 15% APR, though).  I had entered the “other side” – the deep, dark world of credit.  As I analyzed credit reports, gave yay’s and nay’s, I was becoming a smarter, credit-savvy, person.  I couldn’t believe some of the scores I saw!  790, 803, 820!! I hadn’t known they went up that high.  And then, I saw the not-so-steller ones, ones that were as low as 300something.  Wow.  I thought, “I can relate…”  Back when I was 18, it was all about keeping up with the latest fashions, gadgets, whatever.  But as I became older, I realized, all that material stuff just wasn’t important anymore.  My future was.  My future family was.  But credit was just…so easy.  Too easy.

So let’s do some math.  I checked out myFico.com, and gathered some stats about just how, exactly, poor credit can hurt your wallet.  Say you take out a $10,000 car loan for a term of three years:

Your Score & Payment:

720+ = $303/mo, interest rate 5.7%, which equals just $900 in interest
619- = $362/mo, interest rate 18%, which equals over $3,000 in interest

What a difference 100 points make!!  Here is a breakdown on what credit scores mean:

720-850 – Excellent.  You can pretty much have whatever your heart desires, but experts say that those with score like these are pretty darn responsible people and don’t just want whatever – they still plan and save.

680-719 – Good.  You won’t get the best rate, but you will get something reasonable.

600-680 – Poor.  Personally, I wouldn’t call something over a 620 “poor,”, but I’m not the myFico calculater person.  In fact, the majority of credit reports I analyzed had credit scores within this realm.  You will either get approved with a high interest rate, asked to have a co-signer, or not approved at all.

599 and below – Yikes.  You will probably not get approved for anything, and if you do, your loan officer was having a good day, or either only has two weeks left and doesn’t care.

So, are you curious about where you stand credit-wise?  Are you in the same boat as I was back in the day?  Here are some tips to become a more financially-savvy person, no coupons required.

Check your credit reports.  All three.  Equifax, Transunion, and Experian – go over each and every entry to ensure accuracy.  If it’s not right, submit your dispute to have it corrected.  This especially goes for ensuring you haven’t been the victim of Identity Theft. You can get your credit report for free once a year from all three major credit bureaus at annualcreditreport.com.

Check your credit score – This actually helps lenders see how likely you are to make timely payments and even repay your loans.  You can check your score free with Credit Sesame – No credit card is needed, no program to sign up for, nada.  Within 5 minutes of signing up, you will receive your credit score from Experian.

Always pay your bills on time – If you are not able to, call the credit card company and explain the situation.  Be honest.  Right now with the economy the way it is, creditors actually want to work with you!  They would rather receive something instead of nothing!  In fact, did you know that PNC has their own special military program that coincides with the SCRA?  So call your company!  Ask them what programs they have in place to help you make your payments!

Only apply for one or two loans a year – Any more than that, you are drastically hurting your score!  Each credit inquiry counts as a “ding” to your score!  Only apply if it’s going to benefit you.  Transferring a balance for a lower rate, refinancing for a lower rate, etc.  Not because you can save 20% on your entire purchase NOW ({unless, you very well intend to pay it off before interest accrues, otherwise, you just, well, didn’t do a good thing, to put it politely}.

Keep your oldest account open – The Gods at the credit bureaus reward you for this one.  If anything, get this one paid off/down, and current.  It helps show lenders that you have a reliable payment record over time.