Your Credit Score

Your Credit Score

Your credit score is perhaps the most important statistic in your financial life. Maintaining good credit is imperative when applying for a mortgage or other credit. It even factors in when buying insurance, especially auto insurance. Therefore, doing your best to keep a high credit score or improve your score could save you heaps of money.

There are several “credits scores”, including Beacon, FICO, Precision and Pinnacle. They basically do the same thing; rate your credit worthiness. Only a small change in your credit score can impact the amount you pay for a loan or your insurance so reviewing your report each year and correcting problems is important. By government mandate, the three major credit reporting agencies operate a website where one can order a free report. This site is: Annualcreditreport.com. Do not confuse this site with others where you are lured to the site by cute TV ads then pressured to pay for reports.

After reviewing your reports, you can contact the credit agencies and dispute any incorrect information. Nevertheless, there are several items to which you should pay very close attention and correct as soon as possible to insure good credit. One important measure you can take to help you achieve your goas is to budget. Yes BUDGET. Take a half hour to examine your monthly average income and your basic bills. Below are measures your can take to insure a good credit score or improve upon your score.

1. Avoid maxing our your credit card. This sounds simple but many people do not pay close attention to their budget and the next thing they know, they are at the limit. If this is the case, make every effort to pay down the balance as soon as possible.
2. Avoid missing payments. Even one missed payment will hurt your score. Set up warnings on your computer calendar to remind you in time to make your payment and make at least the minimum. While it is best to make a payment large enough to reduce your balance, even in a tough month, pay the minimum.
3. Avoid Expensive Credit. High interest credit cards or finance companies that charge very high reates will send up a “red flag” to the credit reporting companies. Know your rights. Credit card laws enacted in 2010 prevent raising interest on old balances (with some exceptions) and require payments above the minimum to be applied to the highest interest balances. There are more protections. Research them.
4. Avoid taking out too many credit cards. When you go to a department store the clerk often temps you with a savings of 10% or more if you will accept one of their company’s credit cards. Don’t fall for that trick! With each credit card you own, the credit reporting companies reduce your credit score. It appears as excessive consumer credit and down goes the score. Try to hold one or two cards that you use on a regular basis and keep the balance as low as possible. While it is sometimes necessary to maintain a balance for a few months, pay the cards down as soon as you can. If you have a large number of cards you can close some but do so at a measured rate. You don’t want to close too many at once and you certainly do not want to close the ones with the best terms and the ones which you have the best record. Sometimes you have to work a deal with the credit card companies to “write off” some of the debt. Try to avoid this but if you do, work out a deal that will not report an unpaid balance on your credit report. That is the same as a default and could last seven years or longer on your report.
5. Avoid cash advances. Cash advances are accompanied by fees and usually higher interest rates. Even if they have a low interest rate for a period of time, the fees often make up for that. Also, credit reporting companies look at a cash advance with suspicion.
6. Understand promotional rates. Credit card companies often market with promotional or introductory interest rates that will change over time. If you do not understan this you could easily be caught with a huge monthly payment.
7. Avoid over limit charges. There are many fees that credit card companies levy to make more money. One of these is the over limit fee, often $40 or $50! Stay within your credit limit. Going over the limit will deduct points from your credit score.
8. Avoid declaring bankruptcy. While this is unavoidable at times, bankruptcy will stay on your credit report for a long time and make any credit almost imposible to obtain. Working with lenders to pay your debts will maintain credit and allow it to rebound faster.

One of the best and fastest ways to establish good credit is to get one credit card from your bank and use it at least once each month. Pay the balance in full each month, on time. If you make a large purchase such as a new refrigerator or such, you can make payments over several months but pay as much as you can over the minimum and pay it down as soon as you can. This will show the lenders that you are a good risk and a reliable payer._
If you find that there is an error on your report you can contact the credit reporting agencies.




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