Ben’s Challenge, Week 3: My Credit Score

For the past week, I’ve been doing Week 3 of our Action Plan, which included checking my credit score and looking for ways to improve it. Meanwhile, I’ve also been attempting to spend less money. Below, I’ll answer the following questions:

1. Am I spending less since last week?
2. What is my credit score?
3. Can I improve my credit score?

My First Extra-Large Payment

I’m glad to start off by sharing some good news: I made my first extra-large payment of $480 last week (as per my plan), and can’t wait to see my credit card balance disappear like the Wicked Witch of the West.

When I first decided to do this challenge, I posted a photo of my ReadyForZero snapshot showing that my credit card balance was $3,199. Now, it’s down to $2,716:

Like what you see? Get your own snapshot

That’s some serious progress!

On the other hand, my quest to stop using my credit card has already weathered a few storms. But for the past two weeks I have noticed slightly less spending accumulating on my card. I think that’s because of my renewed efforts to spend less and bring lunch to work, rather than eating out. My new plan from now on is to cook food on Sunday evening to use for lunch throughout the entire work week. (Big thanks to Sarah for suggesting this plan in a comment on my update last week!)

My Credit Score

But my main task this week was to complete Week 3 of the Action Plan. And the most important thing in Week 3 is to check your credit score - so that’s what I did. I used CreditKarma.com, which allows you to check your score for free.

It was pretty easy to create an account. I entered my name and some identifying information and within a few minutes I had my credit score in front of me.

Drum roll, please…

My credit score

In general, a credit score above 700 is considered good, so I was pretty happy with a score of 742. My credit score will determine how much interest I have to pay if I take out a loan in the future. This calculator allows you to see the impact of your credit score on future loan rates. (Also see our post on 10 Ways to Improve Your Credit Score.)

Another thing that you can do within CreditKarma is see how your score compares to others across the nation. Here’s how mine compares:

I’m not in the top 10%, apparently, but I’ll take it! Maybe when I’m done with this challenge and I’ve paid off the revolving balance on my credit card then I can get my score up past 750.

It’s important to mention that you can also make use of AnnualCreditReport.com - the government-sponsored website that enables you to get your credit report (for free) once a year from all three of the major credit bureaus. You should take advantage of this service, and then look through the reports to make sure there are no errors. If you do find an error, you’ll need to dispute it, and you should see the FTC recommendations for how to do that. (We also explain the process step-by-step in our Action Plan.)

Improving My Score

I also wanted to find at least one thing I could do right now to improve my score. Luckily, CreditKarma gave me a “report card” that explained how to improve my credit score.

My report card looked like this:

As you can see above, I have one failing mark on my report card. When I saw that, I was surprised, and to be honest, pretty annoyed. I wondered why I would get an “F” for the total number of accounts I have?

Luckily, CreditKarma provides explanations to help you understand how the Credit Bureaus (Equifax, TransUnion, and Experian) calculate each aspect of the credit “report card.” Here’s what the explanation said:

The key sentence is, “Consumers with more credit accounts generally have better credit scores because it means more lenders are willing to grant credit.” That’s a great example of how the rules used by Credit Bureaus can seem counter-intuitive. Is there any reason to believe that someone with 21 credit cards/loans represents a better credit risk than someone with 5 or fewer? At first glance, I’d say no. Yet, that’s the view taken by the Credit Bureaus.

So what I should probably think about doing is getting another credit card. I have to be strategic, however, because the last thing I want is another credit card balance to pay off. What I will probably do is open a card and then use it very infrequently (while always making sure to pay the balance each month).

In the meantime, I’m going to stay focused on completing my challenge. Can you help me by sharing this on Facebook or Twitter?

Also, tell me in the comments below about any tricks you’ve used to improve your credit score! (Or any questions you have about how to improve it)

And don’t forget, it’s not to late to sign up for the Zero Debt Action Plan. Just enter your e-mail address below (we never share it with anyone) and you’ll get a 9-week course on getting out of debt and improving your finances:

If you haven’t read my first or second blog post about this challenge, you can read them here: Week 1; Week 2.

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  • http://carefulcents.com Carrie Smith

    Great job this week Ben! It’s awesome to see your loan balance getting lower and lower. I love that feeling. 

    Also, you and I are Credit Score twinkies since we have the exact same credit score number! :)

    Another option to build credit instead of using a credit card is to take out a short term loan backed by a CD at the bank. It’s kind of like a secured credit card and you won’t have to worry about charging too much on credit. Of course you need some money stashed away in a CD, but it might work.

    • Anonymous

      Thanks, Carrie! That’s quite a coincidence we have the exact same credit score – I’d say that’s a good omen! I like the idea you mentioned as an alternative to using a credit card.

      I also really liked your latest update on paying down your auto loan: http://www.carefulcents.com/january-debt-goal/. I can’t wait to see your next update!

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  • John B

    Ok now help me with mine :). I have been paying ridiculous amounts and can’t get my Amex to $0 or to stay at $0…. They have however offered me a Centurion card… readyforzero doesn’t support Golden 1 yet so I can’t put in my auto loan.

    https://www.readyforzero.com/snapshot/91d9f2a0079b49e3#

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Sorry for the delayed response! As you mentioned, it looks like you have been making some serious payments toward your debt, particularly on your American Express Card, which is great! However, you still have a significant balance remaining, so I would recommend some of the tactics we often discuss on this blog: look at your budget and decide if there are expenses you could do without (at least for awhile). If you can cut back and save a bit more money each month to pay off more debt, that would speed your debt paydown significantly.

      You might also consider ways you could generate some extra income in the short-term either by selling unneeded items on eBay, doing some freelance work, or renting out a room. This too could help accelerate your debt paydown. You might also want to try our Zero Debt Action Plan: http://blog.readyforzero.com/zero-debt-action-plan/. Let us know how it goes!