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Credit is one of the most important things you will ever be responsible for, besides your kids of course!! Without credit you will end up paying much higher interest rates, and in turn dishing out more money for necessities like your vehicle and your mortgage. Credit worthiness is monitored by 3 different credit bureaus Experian, Equifax, and Trans-union. Together these 3 agencies collect information, which is used by lenders to determine your credit risk.
Keep in mind that if you’ve made some credit mistakes, they will not be fixed over night. Luckily, it’s not the end of the world. Below are 11 different tips to help improve your credit, and put you back on track to financial success.
When working on your credit, it is extremely important to have a recent copy of your credit report. No one is perfect, not even the BIG THREE credit bureaus, mistakes can happen and most likely will happen. It is your responsibility to “fact-check” your credit report. You are entitled to one free credit report a year from each agency. You can do this by simply going directly one of the three credit bureaus website, and submit a request. (No credit card required!)
If a mistake is found on your credit report, you can file a free dispute form with the credit agency. Once the form is submitted it is required by Federal Law to validate the information by attempting to contact the creditor who initially reported the claim. The creditor then has 30 days to respond to the agency, if they cannot supply sufficient evidence proving the claim, the matter should be resolved in your favor.
This one can seem like a No-Brainer, but it may be the most important thing you can do: paying your bills on time. If you’ve been late in the past make it a priority to never be late again. When lenders are looking at your information they will typically look back about 24 months to determine your ability to pay back a debt. Generally lenders will not offer you a loan if you’ve been late on an account in the last 12 months.
Some mistakes will only ding your credit score, while other will demolish it. Bankruptcies, unpaid tax liens, car repossessions, and defaults on student loans stay on your record for 10 years. Other mistakes will get erased in about 7 years. Time works to your benefit; as time goes by the significance of these mistakes tend to fade. Your credit rating is like your reputation: it takes a long time to build, but it can easily be destroyed.
Ideally if you have a credit card keeping the limit under 10-30 percent will help boost your score. Once you exceed this limit it can have a negative effect on your Score.
Lenders typically like to see at least 3 open lines of credit. This shows that you are able to responsibly manage your spending. If you no longer use an account DO NOT close it. This will lower your score. (just shred the card instead)
Ignore chain store discounts, like 20 percent off your first purchase if you apply for their store credit card. This will lower your score each time you attempt to open a line of credit. However, you will not be punished for looking for a home mortgage or a car loan. Credit agencies assume you are buying one home or one car if you submit multiple applications within a 30-day period.
If you have no credit you can ask a family member or a friend to add you as an authorized user to one of their credit cards. This will build a baseline credit history that will help you when you apply for your own credit card. Another option is to get a secured card. You deposit as little as $300 with a bank that issues you a card that will have that much money available to spend. You can “refill” your card, and once you’ve established that you can handle your money, you can apply for an unsecured credit card.
If you have any other questions regarding this credit tips or need some help getting started shoot me an email to info@casas-torino.com
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