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We hear it from readers constantly: Im paying all my bills on time, so why isnt my credit score going up?

This feeling that youre doing everything right and not getting rewarded for it is one of the most frustrating things about credit scores. And the simplest answer to that question is almost as frustrating: It depends.

First of all, credit scores are the result of complicated formulas, so that makes it difficult for the average person (even personal finance writers) to pinpoint exactly why your score is the way it is. On top of that, there are dozens of credit scoring formulas, and you cant keep track of all of them. Finally, and heres the really important part, everyones credit history is unique. Without looking at your credit report, a credit expert cant say exactly why your score isnt changing.

In general terms, there are a few things that could be causing your credit score to stagnate. Here are four of them.

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Privacy Policy 1. Your Credit Card Balances Are Too High

Payment history has the greatest impact on your credit scores, but making on-time payments alone wont give you a good credit score. Its certainly important, given how much a late payment can hurt your credit score (it can knock about 100 points off your score, depending on what else is in your credit history), but there are four other major factors that affect your score. The next-most important (after payment history) is your amount of debt.

The key is to keep your revolving credit balances (like credit card balances) as low as possible. This relates to credit utilization: Your revolving credit accounts generally have limits, and the closer your credit balances are to those limits, the higher your utilization. High utilization, in which your debt is more than 30% of your available credit limit, will keep your credit scores down.

I think it's common for a high credit card balance to keep scores [stagnant and low], Jeff Richardson, a spokesman for VantageScore Solutions, said in an email. Consumers will and should expect their scores to increase as a delinquency gets older and older, but if they still have a high utilization, its certainly possible that the score can only rise so much until they pay down the balances on their card(s).

2. Something Seriously Negative in Your Past Is Dragging You Down

Perhaps youre paying debts on time and keeping your credit utilization low. In that case, you may want to look at other aspects of your credit history. If theres something exceptionally negative in your credit history, like a bankruptcy or foreclosure, it can take many years for your score to recover. Most negative information can remain on your credit reports for up to 7 years, so while you wait for the effect to lessen over time, it can help to focus on what you can control: making payments on time and keeping your credit utilization low.

3. Youre Missing Something Important

Though they are the most influential factors in your credit score, on-time payments and credit utilization are not the only things that determine it. How often you apply for new credit, the length of your credit history and the mix of accounts in your file also play an important role in credit scoring.

Theres not much you can do about your length of credit history other than exercising a lot of patience. The longer youve been an active credit user, the better your score will theoretically be, but theres nothing you can do to speed up time. One of the best tips on this topic is to keep your oldest credit account open, because your credit age is an average of your accounts ages. You may have a good reason for closing an old account, but its a decision you shouldnt make lightly.

As far as mix of accounts goes, you would ideally have active installment and revolving accounts to show that youre capable of responsibly managing different kinds of credit. Sure, you may be doing a fantastic job paying your credit cards on time and keeping their balances low, but without any active installment loans, thats only going to do so much for your credit.

Staying on top of just one credit account can be challenging, although doing that well can give you a great score. Mix of accounts is a small part of what determines your credit scores, so opening up a new credit account solely for the sake of your credit score doesnt usually make much sense, especially if you cant manage it and wind up in debt.

4. There Are Errors on Your Credit Report

Whens the last time you checked your free annual credit reports? Its a smart thing to do regularly, as you can spot errors that could be keeping your credit score lower than it should be. If you find an error on your credit report -- that can be anything as little as a misspelled name or as problematic as a wrongful late-payment notation -- you can dispute it with each of the credit bureaus reporting the wrong information.

If you find several problems or are overwhelmed by the task of trying to fix your credit, you can hire professionals to help out. Keep in mind, anything a credit repair company does, you can do yourself for free. Also, make sure to research any companies youre considering. A legitimate credit repair company will not promise a specific jump in your credit score, which is illegal. (You can learn more about how credit repair works here.)

Its also a good idea to check your credit scores regularly. You can see two for free, updated each month, on Credit.com. Viewing these can help you track changes in your credit scores and let you know if and how you should adjust your behaviors to build good credit.

[Offer: If you need help fixing errors on your credit report, Lexington Law could help you meet your goals. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

More on Credit Reports amp; Credit Scores:
  • How Do I Dispute an Error on My Credit Report?
  • What's a Bad Credit Score?
  • How Credit Impacts Your Day-to-Day Life

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"I remember being told that we were going to be spoken to by a bank about how to do a budget and so on.

"We thought it wold be boring, but I remember being really impressed at the way it was delivered.

"It made us realise that we would now be adults and have to pay our own bills.

"It was a bit of a culture shock but spurred me on to learning about managing debt and so on.

"I didn't have a clue about how much it cost to live, and I don't think many children do, its an adult responsibility which gets forced upon you."

Olivia realised the impact the session had on her when she came across some old books from her final year at school.

"They were full of lists of who I had to pay and how much!

"So it must have made me organised, because I certainly wasn't like that before."

As a bank volunteer, Olivia recently helped pupils think about how they would choose between mobile phone tariffs.

"We had deal with questions such as 'Why do we need money?' and 'Why can't we just keep money under the bed!', she smiled. " It was great and I'm looking forward to doing lots more."

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A common bit of advice when it comes to managing debt and gaining financial stability is to avoid credit cards altogether. Though the sentiment makes sense since its always important to manage your interest  it isnt really true. Credit cards have many important uses if youre trying to decrease your debt. So resist the temptation to be binary and check out the ways a San Francisco credit card can actually help your credit and assist you in getting your finances in order.

Related: 6 Tips for Traveling With Your San Francisco Credit Card

1. Consolidate Your Debt

Debt consolidation is one of the best ways to use credit cards as a force of good. The first step is to find a card with low interest rates and good terms. Then you can use that card to pay off debts with higher rates of interest and poor terms. This not only consolidates several payments into one for easier management, but it also lowers your overall expenses by reducing interest. The key is picking the right card with a great rate that wont push you into more debt.

Start by looking at local San Francisco credit unions and banks to see what they are offering. SafeAmerica Credit Union, for example, offers a Visa card with no balance transfer fee which makes it easy to quickly consolidate without getting into even more debt.

2. Use Automatic Payments

If your credit card offers a way to automate your payments each month, and you can link your credit card with a checking account that wont get overdrawn, you should really take advantage of this. Automatic payments will prevent you from getting behind on payment, and ensure that your balance is paid off every month which is key to avoiding interest and falling into deeper debt. If you arent paying off your balance, then you need to rethink the way you use credit cards.

3. Track Your Expenses

Remembering to record payments every time you buy from a food cart, pay a Golden Gate toll or use the no-fee SF parking meters can be hard, but its important to keep track of your expenses. Paying with a credit card ensures that you will have a record of the expense to review no matter what. Its a great way to start managing your finances more closely and keep an eye on your spending each month.

4. Dont Have Too Many Credit Cards

As a general rule, more credit cards equal more problems. With proper consolidation and financial management, you dont need extra credit cards. One card for normal expenses and one card for emergencies should be enough. The more credit cards you can cut down on, the better which is another reason to consolidate.

5. Earn Rewards

Take a look at the rewards you can get for signing up for the right credit card in San Francisco, and you might be pleasantly surprised. Todays credit cards come with some powerful rebates, cash rewards and other reward programs that can help you save and earn money. Some local banks and credit unions even offer rewards on local goods or services that you regularly purchase. If you are going to use a credit card, you should make sure it fits with your lifestyle and works for you.

Credit cards can help you manage finances responsibly if you use them the right way. So set your goals, take a look at your current card usage and start making plans to save money.

SafeAmerica Credit Union is a GOBankingRates client.



Ranjeet S Mudholkar

What is dilemma? A doubt, fear, uncertainty and/or a combination of all. From where does it come from? And what do we mean by lsquo;financial dilemma in this context? Why and how does it come into existence and play? What should be done to mitigate the same? Some obvious financial decisions which may cause dilemmas are: finding a balance between spending and saving, spending on credit, managing debt, protecting capital, investing for optimal returns, insuring adequately and saving income tax, etc.

Established principles

a) One important manner to utilise ones net of tax income is to allocate approximately 1/3rd of it in each of the major heads, viz. investments, loan repayment and expenses. Though this mechanism may not be feasible in early stages, it needs to be properly grounded as a rule, viz. One-Third Rule during the middle stage onwards. b) Avoid credit for purchase of depreciating assets like car, electronic gadgets, etc. though one may use arbitrage against the funds availability if possible. Use of credit for discretionary expenses like leisure, entertainment, vacation, etc. is a strict NO. One needs to also put limits on such expenses. An exception may be dealings in business where the depreciation charged or interest expended could be claimed as expense. c) Risk mitigation is very important to ensure that our financial goals are not affected due to life, health and other contingencies. This requires right quantum of covers for life, non-life and medical including that for life-threatening diseases.

Rational decision-making approach

First and the foremost requirement is to set ones priorities in order. It is very important to develop a right approach to money in general. It deals in the first place with mental accounting of money, as it is aptly contained in the British phrase penny wise, pound foolish, ie one may be very careful or mean with small amounts of money, yet wasteful and extravagant with large sums. For example: many people negotiate for small amounts ranging from Rs 10 to Rs 50 when buying vegetables and commuting in public transport. The same people would not mind paying Rs 100 to Rs 500 extra when dealing in bigger expenses such as buying an air ticket, dining in a restaurant and tipping. There may be hundreds of examples like that. As is the lesson in another dictum, A rupee saved is a rupee earned, it needs to be reiterated that the value of money is universal in all forms and substance.

The right approach

The disciplined outlays for individual financial goals and systematic investing to achieve them can save us from many financial dilemmas. They define a format to deal with a financial situation by taking a 360deg; view of the future impact of our decision. For example, an impulsive foreign holiday on credit can give way to a local vacation within our cash means while investing systematically for other important financial goals. Similarly, saving money to purchase a depreciating electronic gadget is much preferable to buying the same instantly on a costly personal loan. It is thus a play between instant indulgence and delayed gratification. It is good to allocate our earned income to important life goals first and then spend the remaining amount, more like the 1/3rd division principle stated above. Regular savings towards goals help us in minimising costly debt and other dilemmas when we are nearing those goals. Optimising debt, insurance and taxes Long-term debt is incurred in acquiring productive assets like a house, which appreciates at a rate greater than the cost of loan, while providing tax benefits of deduction from taxable income of repaid loan and interest within defined limits. It is good holding on to such debt instead of prepaying when the rate of interest on loan is lower, say 8-10% pa compared with the medium-term return expected on investing incremental savings, bonuses and windfalls. The other type of debt like personal loan and credit card outstanding is usually of short term but at high rates of interest between 18% pa and 35% pa They are usually incurred in discretionary spending like vacation and in acquiring depreciating assets like car and electronic gadgets. It is best to repay such loans whenever we have excess money. Insurance must be taken to sufficiently cover the risk to life, assets and liabilities. Premium paid should be considered as costs of such cover and services. If we desire a return of such paid premiums or a marginal return thereon, the insurance cover falls drastically making us neither insured enough nor invested prudently. Insurance should also not be seen as a means to save income tax. Many individuals go to the extent of exhausting maximum limits under various sections in order to save income tax. Tax optimisation should be in the overall strategy to meet financial goals rather than making investments in isolation which may lead to lopsided investments that may not generate optimal returns.

Ensuring adequate retirement corpus

Retirement planning saves us from a lot of financial dilemmas during our final phase of working life. Starting early is the best option to have the magic of compounding work in our favour. The returns will gradually become marginal from investing our money in the future, while the life spans improve. At best, considering a 1% real rate of return (after adjusting for 4-5% pa inflation), an individual spending Rs 50,000 per month at age 30 requires a corpus of Rs 6.7 crore at age 60 to sustain expenses till 90 years of age. It would be a financial dilemma to amass such a corpus by generating optimum returns while meeting all other essential life goals, if right steps are not initiated timely. This requires an exposure to equity products which itself is a dilemma between protecting capital and generating the required return. The writer is a Certified Financial Planner, vice-chairman and CEO of Financial Planning Standards Board India. The views expressed in this article are his own

No Serious Interest in Compounding

He grasped the power of compound interest, but there’s no indication that he ever executed on this vital understanding by opening an investment account for his son with $1,000 or even $500 — and then simply leaving it there to earn interest on interest on interest.

For certain, he never talked to me about compound interest, or even showed me how it worked and with neither my mother nor with my father did we talk for more than an hour about money: what it is, how it works, how it grows, how it shrinks, appreciation and depreciation.

Most important, perhaps, is that my parents never told me of the one luxury I had before me: time, time to let compounding work on my behalf.

There was always plenty of discussion about financial scandals involving others, how well some people did financially and even how my one financial advisor uncle seemed to be doing very well for himself.

Mom found a job and paid the bills. Dad sent her checks to help.

With the conversion from a fixed to a floating currency exchange rate and the subsequent oil price shocks in the 1970s, by the end of that decade every $100 bill my father sent my mother was worth only 200 Swiss Francs instead of the 700 or 800 at the beginning of the decade.

When mom’s income dropped, we simply moved from a house into an apartment.

She earned enough in a very wealthy country. We spent vacations in France and Italy often, and if you were earning Swiss Francs, as my mother was, you could spend freely in those countries and it would hardly make a dent in your budget.

Money Bores Me

There was no reason to be obsessed with money, far from it.

In fact, my mother actively discouraged talking about money. “Money bores me,” she used to say, not only to me but often to invited guests over dinner.

For her, it was almost a point of pride to announce to the world that she didn’t care. I suspect it was in part a reaction to her two brothers joining the banking industry and a rejection of Geneva and the private wealth it stood for.

Finding work in art galleries during her varied and interesting life adventure, I suspect she also ran into a lot of people who spent hours talking about prices and value, not about the artistic expression itself.

The few times I tried to bring up the conversation of money, her terse responses were that we never talked about money. No, not in our family, not with our tradition of discretion and fine taste, whatever that meant, at least when it came to money.

To talk about money was bad form, in poor taste, for “others,” folks excited by base commercial interests.

Yes, I grew up are repressed as they come, particularly when it came to money and only later did the irony hit me: two uncles in finance, banks plastered all over town and I grew up in a household where we never talked about money.

Did I miss something?

In fairness, consumer capital was far less developed than it was in the US and I wasn’t old enough or tuned into the idea that you could borrow against equity and as values rose, so did your borrowing power.

We never, ever borrowed and when it came time in 1989 for mom to retire to the South of France in a small house, she paid for the property, some land and the renovations in cash.

Don’t forget that this was an era before inexpensive computers, compound interest and retirement calculators on the Internet and web banking. Calculating compound interest was a chore, especially for my mother, who never graduated high school.

Since I grew up in rental homes, I can’t recall a time when we ever paid interest. We were never in the business of managing debt and I do remember mom giving me a printed spreadsheet urging me to write down inflows and outflows.

Debt was a four-letter word. Better avoiding it at all costs instead of learning to manage it.

Like many of my peers, I entered college mostly clueless about money and economics, though I had the good sense not to rack up any high- or even low-interest debt. All those surveys about how families don’t talk about money? Yep, that was us.

Breaking the Habit

When my daughter came long in 2004, I vowed I wouldn’t make the same mistake. I would talk to her about money, without going overboard, of course. Most important, though, was to show her the power of compounding.

When she was 9 years old, I stuck a glass jar in her room opposite her bed. In it, I put a $100 bill she received as a birthday gift.

Then I gave her a choice. She could break that $100 bill and buy whatever she wanted as long as it was less than $50. Or, she could leave the $100 bill intact in the jar and I would add a $1 bill to the jar every week for one year.

Since she had nothing in mind she wanted to buy, we left it in the jar and let the principal earn interest.

Her days filled with school, friends, camp and soccer, I suspect she kind of forgot about breaking the C-note. But I often wonder if she lay in bed before falling asleep thinking of the relationship between her “Benjamin” and George Washington on the $1 bills.

I don’t know if this simple interest experiment will influence her in the future, but I refer to it here and there as she gets older and we talk about borrowing and lending. Every time I mention the $100 bill in the jar, she remembers it.

The jar’s gone now, her principal and interest in the bank. Last year, I opened a UTMA account for her at our mutual fund.

Already peeved at myself for not opening an account for her the year she was born, or asking my father or mother for $1,000 to open the account, I withdrew some money in my Roth individual retirement account. I opened an account in her name and shovel $100 a month into it.

At the end of the year, as I have promised myself I will do at the end of every year until she’s an adult, I bring up her account on the computer and show her the power of compounding through the quarterly dividend.

This week she received $41.21 in quarterly dividends and her current balance is $9,879.26. Before long, we’ll both be able to look back with some satisfaction that she’ll have the equivalent of about $1,000 a year in her name.

Many years from now she may revolt, as my mother did, and choose to ignore me entirely. But I want to look back one day and tell that she was blessed with the greatest gift of all, the gift of time, and I wasn’t going to let simple or compound interest just walk away from it.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email#160;protected]

 Entire contents copyright 2016 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.