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5 FAQs About Your Credit Score

Money Girl answers your most pressing questions about credit reports and building a good credit score.

By
Laura Adams, MBA
5-minute read
Episode #250

Question #3: Can a New U.S. Resident Build Credit?

In the U.S. credit scores are tracked by your Social Security number. That means any resident who qualifies for a Social Security number can build a credit file here.

Lauren asks: I moved to the U.S. from Australia and have been working full time for 7 months. I finally got approved for a credit card with a small credit limit but I still have a low credit score. How can I raise my credit score so I can buy a home soon?

Building credit with a secured or unsecured credit card doesn’t happen overnight. The length of time that you’ve had credit plays a big role in how credit scores are calculated. So if you’re just starting out, simply focus on what you can control:

  • Monitor your credit report to watch for any errors

  • Pay all your bills and credit accounts on time

  • Keep your balances on credit cards below 30% of your available credit limit

  • Don’t apply for a bunch of new credit accounts too quickly

Question #4: Should I Close My Unused Credit Cards?

Many people mistakenly believe that canceling credit cards will increase their credit score. In fact, you need to be strategic when it comes to closing credit accounts because it can work against you.

J. asks: I have 6 credit cards and always pay them off each month. I want to close 2 of them and get a new card with a better cash back program. Will doing that hurt my credit?

I recommend closing credit cards that you don’t use, or that could get you into financial trouble, except in 3 situations. In Guidelines for Closing a Credit Card I recommend never closing a card that:

  1. has a high credit limit

  2. you’ve had for a long time

  3. would leave you without at least one credit card

Question #5: How Does Co-Signing a Loan Build Credit?

If you have no credit or poor credit, you can ride the coattails of someone with good credit if they’re willing to sign an application with you.

Luke asks: I have good credit and co-signed a car loan with my teenage daughter so she could get a low interest rate. Since I’m going to make the payments on her behalf after she forwards her money to me, will the loan still help her build credit?

When you co-sign for credit, both parties share legal responsibility for the debt. Additionally, the account’s payment history gets reported on both credit files, no matter who actually pays up. So if Luke makes payments on time each month, both he and his daughter will benefit.

But the reverse is also true because co-signing can devastate your finances and credit if you co-sign with someone who can’t or won’t meet their monthly obligation.

Get More Credit Score FAQ!

To get the answers to 20 more frequently asked questions about credit reports and building a good credit score, watch this video.

Then download the Credit Score Survival Kit, a free multimedia resource that includes a video tutorial where I show you step-by-step how to check your credit report. You typically have to pay to get your credit score, but the tutorial also shows you how to get it for free as often as you want, with no strings attached!

Download FREE chapters of Money Girl’s Smart Moves to Grow Rich

Need some help with your New Year’s financial resolutions? Just grab a copy of my book Money Girl’s Smart Moves to Grow Rich. It tells you what you need to know about money without bogging you down with what you don’t. It’s available at your favorite book store in print or as an e-book for your Kindle, Nook, iPad, PC, Mac, or smart phone. You can even download 2 free book chapters at SmartMovesToGrowRich.com!

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There’s a huge archive of past articles and podcasts if you enter a topic in the search bar at the top of the page. Connect with me and learn more about money here:

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Laura’s email: money@quickanddirtytips.com

More Resources:
How to Build Credit – Podcast Episode 169
How to Raise Your Credit Score Fast – Podcast Episode 164
How Do Credit Cards Really Work? – Podcast Episode 248
Credit Score Survival Kit – a free multimedia resource to raise your credit
Credit Score FAQ VIDEO – get the answers to 20 more credit questions
 
Image courtesy of Shutterstock

 

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlersbook is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.