7 ways to help improve your credit/ 7 myths to hurting your credit
7 ways to help improve your credit/ 7 myths to hurting your credit
WHAT TO DO TO MANAGE YOUR CREDIT SCORE AND IMPROVE IT AS WELL
1. BE PUNCTUAL
Ensure you pay all your bills on time. The greatest negative effects on your score can be late payments, collections, and bankruptcies. If you have had problems in the past paying your bills on time do not let that bad habit stop you from changing your ways. The faster you break that habit the sooner you will be able to repair bad credit. When the credit bureaus note a "late payment" this usually means the payment was 30 or more days late. You also want to make sure you try to avoid the late fee date which is usually 10 to 15 days past the due date. This means you want to ensure you pay things before the due date. Just remember the most important date for avoiding a bad credit report starts with missing a payment by 30 days or more.
2. CHECK YOUR CREDIT REPORT FREQUENTLY TO AVOID INACCURACIES
No one is perfect at supplying accurate information, including the credit bureau. Don't let your credit score suffer due to inaccurate information. If you notice something on your credit report that is not yours make sure you contact the creditor associated with the account or contact the credit reporting agencies immediately and get this corrected. If you don't understand your credit report, but know that the information is incorrect take the necessary actions. Don't avoid this step because you don't completely understand the credit report. You are able to obtain one free credit report a year through www.annualcreditreport.com. This credit report will not show you your credit scores, but it will show you the items that make up the credit report and help you see if there are any mistaken items. If you find items that should not be on your credit report you may follow through with the correction process on your own or you may have to hire a professional.
3. RESOLVE NEGATIVE OPEN ITEMS
Open unresolved credit accounts can be hurting your credit score. These accounts could be old unpaid credit cards charge offs, medical bills, or student loans. You might not have had anyone call and try to collect their money from you in years, if they have every tried to call at all. Either way, if you want to increase the quality of your credit report then you should pay these off immediately, this will "close" or resolve the credit item.
4. WATCH YOUR DEBT
Keeping up with your account balances is very important. You want to make sure your account balances are below 50% of your available credit. For example, if you have a credit card with a credit limit of $1000 then you want your balance to stay $500 and lower. Any time you have extra cash you should put it towards your credit card debt to help increase your report score. Don't worry about paying off secure loans like mortgages and auto notes, but do keep in mind that you need to keep these notes current each month to affect your credit score in a positive way.
5. GIVE YOURSELF TIME
One major factor that can help improve your credit score is time. You want to be able to show a long history of paying your bills on time and that you are responsible with your credit lines. One easy way to lengthen your period of active credit use is to always keep your oldest account opened. However, as soon as a negative credit event ends the affect that it has had on your credit score will begin to shrink. To ensure that the negative credit is no longer affecting your score you must make sure that the event has closed. Don't mistake a creditor saying an account is "charged off" as the incident is over and you don't owe them anymore. This is just an account that is unsatisfied and will continue in this status until taken care of. Not paying your debt is never the way you want to go when trying to improve your credit score. Paying off an account is going to be a huge step in improving your credit. Depending on how bad your credit is determines how fast your credit score will go, however you should see some improvement within a year.
6. ADJUST YOUR CREDIT LIMITS
Refer back to step 4 and remember how important it is to keep your ratios at 20%- 50% or less of credit availability. If you are in a situation and are unable to pay your credit accounts down and your credit is good enough, you might want to consider raising your limits to increase your ratio. If you are able to increase your limit DO NOT use the extra money! If you feel as if you might be tempted you use the extra credit then this is a dangerous method and would suggest pay the bill on time monthly. If you have your credit cards paid down to 20%- 50% or less then reducing your credit limit could possibly help you.
7. ESTABLISH VARIOUS TYPES OF CREDIT
Having various types of accounts is important. If you have a mortgage and a car loan you might want to think about opening a credit card, but use it conservatively. If you have never had any type of loan you might want to think about getting one next time you have to make a big purchase (like a car). This doesn't mean go out and get a loan, but if you do need to purchase something don't pay with cash. Try to get a loan and then pay it on time monthly and if you have the cash available pay the loan off after 6 months. If you don't have any credit then a secured credit card would help you. The three most important accounts are always going to be mortgages, car loans, and credit cards. Do not have a lot of department store credit cards or open lines of credit with businesses.
CREDIT ESTABLISHING MYTHS
1. WILL MY CREDIT SCORE DROP WHEN I CHECK MY CREDIT
Good news is this one is not true. When you check your own report and score it is considered a "soft inquiry" and will not harm you. When a creditor or lender checks your credit it is called a "hard inquiry" and is able to bring your score down a few points. If you are shopping around for a loan and are worried about your credit score dropping don't worry, multiple inquiries for the same purpose in a short period of time are usually grouped together which will have a less damaging affect.
2. WILL CLOSING OLD ACCOUNT IMPROVE MY CREDIT
In most cases closing an account can have a negative effect on your credit. When you close old credit accounts it will make your credit history appear shorter. If you feel like you need to close an account try to choose a newer account instead of the older ones.
3. IF PAID OFF WILL THE NEGATIVE RECORD BE REMOVED FROM THE CREDIT REPORT
It is always a good idea to pay off your debts. Negative records however can stay on your credit report up to 7 years, even if paid off, and bankruptcies will stay on your credit report for 10 years. If you pay off an account before the term has ended the account will still remain on the report but will appear as "paid". Paying off your debt is your best options but the real improvement will happen when the record expires.
4. DOES BEING A CO-SIGNER MAKE YOU RESPOSIBLE FOR THE ACCOUNT
You are taking responsibility for an account whether you are opening a joint account, co-signing on a loan, or becoming an authorized user on someone's credit card. Both persons will be held accountable for any activity, good or bad, on these accounts and it will be reflected on both persons credit report. If you are a co-signer on a friend or family members' loan and they fail to make payments, your credit profile will suffer.
5. 50 POINTS WILL BE ADDED TO YOUR CREDIT REPORT WHEN YOU PAY OFF A DEBT
There is no way to calculate how many points you can gain by changing one factor. If a person has a really high credit score, sometimes just one late payment can drop their score significantly, where as if someone has a low credit score that late payment may only drop their score a little. Your credit score is calculated using a very complex system that takes into account many different factors and values. There is no miraculous way to instantly bring your credit score up. The most important thing you must remember is that good financial behavior and time are the two factors on your credit score.
6. CAN OPENING NEW ACCOUNTS RAISE YOUR CREDIT SCORE
Opening new accounts is only going to help your credit if you have not established credit yet. If a person already has several established accounts they should not attempt to create even more credit lines as means to achieving a better looking credit report.
7. CREDIT CARD COMPANIES PROTECT ME FROM FRAUD
Identity theft can affect you in many ways and cause mayhem in your life. Although credit card companies say they will not hold you financially responsible for fraudulent charges, if you are a victim of identity theft it will end up costing you money regardless. You are the only person who can truly be responsible for protecting your personal information. Don't give in to internet scams, enter your credit information on an unsecured web site, or give your personal information to someone by phone if you don't know who they are.
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