I have been talking to some girls and as it turns out, most of us have no clue how to manage our FICO scores and have pretty much just given up on credit cards since we typically just max them out and then pay the bills when we feel like it, if ever. I really want you to feel in control of your finances and your future, and I think having one credit card with a decent spending limit for “just in case” scenarios is important. Girls turn ankles and can’t work. We go through break ups and can’t bring ourselves to dance for a few weeks, we have deaths in the family, car accidents, kids with broken arms, etc. We also need to rent or purchase homes, we will need to get jobs or start businesses of our own later. Many of these things wil require credit checks, and those of you who have proven irresponsible in this area will be shit out of luck, so I am going to give you a basic plan to get your credit cards under control:
1. Pull your FICO scores. Your FICO score is basically your Bill Paying Grade, and it ranges from 300-850. There are 3 different bureaus that are keeping track of your spending record, so you should probably get on top of it, too. You can pull this from MyFico.com. Beware of sites that offer free credit checks, they will often bill you for other services that you don’t request, and you cannot stop the payments without canceling your card all together, so try and avoid those.
2. Scour what you see. Make sure everything on there is real, and you actually charged those items. Start calling any companies that have closed your account or have gone to collections and ask for a settlement. Pay off all of these and keep the accounts closed.
3. Get down to only one credit card with the lowest interest rate possible. Close all store cards (these are a trap) and never open another one. I don’t care if they give 90% off at the register, these cards are a scam! Work out a payment plan for anything else that comes up. Your goal is to get your debt down to zero.
4. Understand how interest works, don’t pay the minimum! So basically here’s what happens. You have a 10% interest rate and you charge $300. When you get your bill you pay on time, but you only pay the minimum payment of $25. You now have a balance of $275 on your credit card, all of which is charged a 10% interest immediately. You just got charged $27.50 for nothing. Credit card companies are banking on the fact that you cannot make your payments and therefor need to pay only the minimum, this is where they make their money, so don’t charge what you can’t pay off in full. Pay in full as soon as you get your statement! Late fees are also subject to being charged interest, and your rates will likely drop if you pay on time for 6 months.
5. Your FICO score is determined by the ratio between these 2 things: your credit limit vs. your current debt. If you have a $500 limit on a crappy card, and you owe $400 on it, your credit is going to suck. Keep your balances low and your payments regular!
These are just some basics, we could of course go way deeper, which I advise you to do! Any questions, feel free to post them, I’ll try and address whatever I can!