If someone handed me one million dollars and said "Write an interesting, easy to understand book about credit scores and how to improve yours," I would hand the money back and say it cannot be done. Liz Pulliam Weston is probably one of the only people on the planet who is able to that successfully with her book Your Credit Score: How to Fix, Improve, and Protect the 3-Digit Number that Shapes Your Financial Future.
As a responsible saver and spender, I figured that I knew enough to get by without reading this book. I was wrong. The credit scoring formula is just that: a formula, with all kinds of idiosyncrasies that may cause your credit score to have little do with how responsible you are. For example, as a young person with little credit history, I thought that I could build my credit up by getting a credit card, using it instead of a debit card, and paying it off in full each month. This is certainly a financially sound thing to do, but there's one problem: Surprisingly, it could impact my credit score.
According to the book:
Lenders report your balances to the credit bureaus on a given day (usually each month, but sometimes every other month or quarterly). It doesn't matter if you pay the balance in full the next day-the balance you owed on the reporting day is what shows up on your credit report... So you need to be careful with how much you charge, even if you never carry a balance from month to month. Your total balance should never approach your credit limit if you want a good score.
This paragraph alone will cause me to shift my credit card habits to improve my FICO score. This book is full of just tips. Another problem is that there are a lot of myths and misinformation floating around about credit scores. Weston devotes chapter 5 to debunking "Credit Scoring Myths." Here are just a few of the myths:
- Closing credit accounts will help your score.
-You don't have to use credit to get a good credit score.
-You have to pay interest to have a good credit score.
The books also includes sections on, just to name a few, identity theft, insurance, and rebuilding your score after a credit disaster.
This book is a must-read for everyone. If your a parent with a teen, make them read this book. When kids go off to college, they are bombarded with offers of credit, and many will get themselves into serious trouble. This book will save them thousands, and even hundreds of thousands of dollars, and allow them to buy homes sooner, which is the road to wealth for most people.
Another book that all young people should read: Go buy it for your kids...right now: Suze Orman's Money Book for the Young, Fabulous, and Broke.
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