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Confronting Credit

Confronting Credit

By Alexa von Tobel

Confronting Credit

By Alexa von Tobel

One of the topics in finance that causes questions and stress is understanding credit. Many Americans struggle to understand what credit is and why it’s important to have “good” credit.

Like anything else in life – the more you know, the more confident you are likely to be in addressing credit and taking action!

I’m Here to Treat My RA – So Why Should I Care About Credit?

Of course good credit applies to everyone, but for those with a chronic condition like rheumatoid arthritis (RA), having a good grasp on credit is critical.

Credit 101

I often say a credit score is the only grade that matters after you leave school. It is a simple way to sum up your personal finances or “fiscal responsibility.” In a nutshell, the FICO score is a global standard for measuring credit risk. Credit scores range from 300 (the lowest) to 850 (the highest) and your credit score should be in the high 600s to low 700s to be considered "Good." Credit scores are made up of several categories, including payment history, length of credit history, credit mix (types of accounts you have and how many), new credit and current amounts owed.

A higher score will get you better interest rates when you need to borrow money, which can save thousands of dollars.

“I often say a credit score is the only grade that matters after you leave school.”

How to keep your credit score strong

Many things can improve credit scores, but since they can be dizzying, let me help you focus on the most important: never miss a bill and keep your oldest card open.

  • Try not to miss bills:It’s not always possible (and definitely understandable!), but it’s important to try to pay bills on time. Set up automatic online payments for recurring items like credit card and cable bills. The three bills that are most likely to be missed are parking tickets, doctor bills and hospital bills.
    • Tip: Keep a ledger of all your appointments and cross check them after bills are paid to keep track of your payments, but also to catch errors!
      • Stephanie Aleite (student, blogger, advocate and person living with RA) says: “This is a great tip! I have personally caught many errors in medical billing over the years. One time, a lab accidentally charged me $120 for lab work that should have been billed to my insurance. Luckily, I caught the mistake quickly and it ended up being free for me!”
    • Tip: If you can’t help being late (it certainly happens!), call your creditor. They may be able to offer a grace period, and generally won’t report you to credit bureaus until the payment is more than 30 days late.
  • Length of Credit History: The longer you’ve had credit, the more creditors can trust that you’re a responsible borrower. You wouldn’t get a haircut from someone who just started stylist school yesterday, right? Creditors are even more leery.
    • Tip: Keep your oldest card open. Canceling your oldest card will erase its history.

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