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Building and Maintaining Strong Credit

By: Wendy Catone

Do you have a practice remodel, equipment upgrade, or home purchase in your future? Then now may be the time to take action to improve your credit score.

Good credit is one key to both your professional and personal financial investments, and your credit score is one tool used to signify to lenders your overall creditworthiness. In fact, your credit score may be significant in determining the amount of money you will be allowed to borrow and the interest rate you will be charged. While lenders consider a number of factors when making a credit decision, one of the most important aspects of your financial profile is your personal debt - including student loans, credit cards and lines of credit – as well as your overall credit score rating.

Tips for Managing Debt (1)

  • Plan to pay your bills on time - Prioritize and schedule your monthly payments, making sure to pay at least the minimum balance every month on all your accounts. Your payment history makes up approximately 35% of your credit score, so making timely payments is an important way to improve your credit score. It's a good idea to have your credit card bill paid automatically on or before the due date, in which case you might want to set up automatic monthly payments. 
  • Keep track of your credit balances - Stay on top of how much you've borrowed against your available credit and make sure to stay within your credit limit - and your budget. Keeping track of your spending may help you avoid maxing out your credit cards, exceeding your credit limit, or missing payments.
  • Contribute to an emergency fund - In addition to a regular contribution to your savings account, consider setting money aside every month for an emergency fund. This may help ensure that you'll be able to meet your credit obligations and unexpected expenses, if your situation changes. One way to simplify saving for your emergency fund is to set up recurring transfers into a savings account through your bank.
  • Avoid maxing out credit accounts - Keep track of your credit transactions, especially your credit card activity. Check that you're not exceeding or maxing out your credit line, since this may reflect negatively on your credit report. 
  • Monitor your credit reports - Review your credit reports at least once a year with all three national credit bureaus. You'll be able to catch any errors or fraud and correct them before they impact your credit history or credit score.

Credit scores versus credit reports

Your credit score is a numeric expression of the information contained in credit reports generated by three major credit bureaus - Equifax, Experian, and TransUnion(2). These credit reports summarize your credit history including the types and amount of debt you have held in the past and your timeliness in making payments. Certain credit events may have a highly negative impact on your credit reports. Some examples are charge-offs, debt collections, bankruptcy, foreclosure, tax liens, and judgments.

The credit score itself is assigned by an independent rating company, such as those provided by FICO (Fair Isaac Corporation) (3) and VantageScore 3.0. Credit score rating is not a precise art, as each rating company develops its own score range and lenders have their own definitions of what may comprise a good or poor credit score. FICO and VantageScore 3.0 are two that use a score range from 300 to 850, with higher numbers indicating the borrower is a more favorable credit risk, and lower numbers indicating the borrower is a less favorable credit risk.

Credit scores from FICO for the general population are typically comprised of the following mix of personal information (3):

  • 35% - Payment history
  • 30% - Amounts owed
  • 15% - Length of credit history
  • 10% - New credit
  • 10% - Credit mix

Remember, a good credit score can be fundamental for securing a maximum level of financing at the lowest possible interest rate. So don't wait - whether you're buying your first practice or your first home, a good credit score can mean more money in your pocket.

 

(1) https://www.wellsfargo.com/goals-credit/smarter-credit/manage-your-debt/tips-for-managing-debt/

(2) For example only. No endorsement implied

(3) http://www.myfico.com/CreditEducation/articles/

About the Author

Wendy K. Catone is the Florida Business Development Manager for Wells Fargo Practice Finance. She is an experienced consultant and finance professional who has been servicing the financial needs of healthcare practitioners for over 25 years. Ms. Catone speaks at seminars and professional schools throughout the year. With a variety of financial products, Wells Fargo Practice Finance helps dentists start, build, grow, and transition their practices throughout their career. She can be reached at 800-708-0279 or wendy.catone@wellsfargo.com

View all articles by Wendy Catone


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Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

ADA® is a registered trademark of the American Dental Association. ADA Member Advantage is a service mark of the American Dental Association. ADA Member Advantage is a program brought to you by ADA Business Enterprises, Inc., a wholly owned subsidiary of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

ADA® is a registered trademark of the American Dental Association. ADA Member Advantage is a service mark of the American Dental Association. ADA Member Advantage is a program brought to you by ADA Business Enterprises, Inc., a wholly owned subsidiary of the American Dental Association.

All financing is subject to credit approval.

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