Good Habits for Good Credit - There is little or no financial training or education provided to consumers. Most of what people learn about credit and finances is what they see from their parents or what they figure out from trial and error. Here are some habits that my customers with great credit do to keep their credit great.Developing good credit habits and building a favorable credit history should be a part of everyone's personal financial plan. One tiny blemish on your credit report won't knock you out of the running for a home mortgage, but a series of black marks can prevent you from obtaining just about any type of credit on favorable terms. Here are four simple rules to follow by:
1. Limit your own supply of credit.
2. Use a few credit cards steadily and consistently.
3. Watch out for minimum payment traps.
4. Pay your bills on time.
Do not max out your credit card balances on your credit cards. After you pay off your credit card balances do not close the credit cards associated. When you close the credit cards this shortens your credit history. By leaving them open you are able to establish a longer credit history and therefore increase your credit score.
Federal Legislation has required that each of the three (3) major credit agencies make your credit report available to you once per year. Simply check your credit report for errors, omissions, etc. by logging onto www.annualcreditreport.com and have access to your report from Equifax, Experian, and Trans Union. From there you can dispute inaccuracies and potentially get them removed, best of all it is overseen by the government and it's FREE!
A good credit score can be achieved by practicing prudent financial responsibility. Having good credit often qualifies you for better rates and more aggressive (LTV) loans.
Avoid offers such as "90 days same as cash", "no payments for one year", etc. Signing up for these kind of offers result in installment type credit accounts on your credit report. Having consumer installment type accounts can result in lowering your credit score.
Keep your credit card balances at 50% of the limit or lower. This will greatly affect your credit score in a positive way. This will also make it easier to pay off if need be.
Honor your agreements with vendors. Do not stop making installment payments because you are dissatisfied with an appliance you bought. Instead, try to resolve the issue with the vendor, even if it means going to court. Vendors who grant you credit on purchases can report to the credit agencies. Another common mistake people make is they stop honoring sales agreements they make with mobile phone companies. Many mobile phone carriers give away phones for free with a 1 or 2 year contract. People who break their contracts will be reported to credit bureaus.
If your credit score is lower than you expected, ask us about what steps you can take to improve your credit score to qualify for the loan programs you require. A debt consolidation loan can help pay off many of the debts such as credit card debt and monthly installments which are dragging your credit down, and regular payment of your new lower monthly mortgage payment will help raise your scores as well.
A mortgage can be a great tool for building a strong credit report and high credit scores. If you had poor credit when you first obtained your mortgage you should check your credit report and consider refinancing. Your scores will see the most improvement if you make every payment on time and don't acquire too much new debt. If your credit scores have improved you may be able refinance into a lower payment and see increase cash flow every month.
Avoid mortgage lates at all cost. They significantly drop your credit score and will brand you as financially irresponsible.
Once you make the decision to obtain a mortgage, refrain from seeking other types of credit, whether it is a car loan or a credit card. These inquiries can lower your credit score and increase your mortgage costs.
Online banking, online bill paying, direct deposit and automatic withdrawals.
Technology is a great habit to get into with your finances. If you can direct deposit to multiple accounts start putting your savings away before you even see it. If you can pay your bills with an automatic withdraw start to set it up, and stop trying to make time to pick up stamps, stop by the post office and drop off your mail.
Don't schedule one time of the month, or week to pay your bills and balance your check book, etc. Pay your bills as soon as you get them.
Credit inquiries can also have an affect on your score. Refrain from applying for too many credit cards, gas cards, or department store cards because too many inquiries can lower your score.
Good Way To Improve Your Credit - If youre trying to improve your credit you can call your creditors and explain to them what youre trying to do and offer to pay 30% to 40% settlement. Most companies will allow this to happen. Its called a settlement payment. Once you have agreed on this, you should always get it in writing then submit it your all three Credit Bureaus. The bureaus should update your credit report to show settlement paid in full. Even if some creditors decline, you should still get it in writing. In a reasonable time you will see a difference.
Keep your balances on your revolving credit, such as credit cards and equity lines, to a minimum. You should keep all of your balances below 50% of your credit limits and preferably your target range should be 20-40% of your credit limit. An example of this would be if you had a credit card with a 1,000 dollar limit you would want to keep your balance between $200 and $400 ideally. This will help to boost your credit score. Never max your credit cards out and definitely do not go over your limits.
Another way of improving your credit is to ask parents or family members that have credit cards which are in good standing and they carry no balance to add you on as an authorized user. That way you will gain the history of that credit card onto your own credit report. But be advised that if they make a late payment or max out the credit card it will affect your credit report as well.
Applying for too much credit can end up hurting your score. Apply for one card at a time and allow some time before you apply for another.
You will also want to make sure that all the information on your credit report is accurate and true. Most reports contain errors and some can be very damaging. You can do this yourself or contact a credit repair company to assist you.
The most important thing you can do for your credit score is to make all of your monthly payments on time. Even one late payment can drastically lower your score. If you are short on cash one month and you know you won't be able to pay all of your bills on time, try to put your debt payments on the top of your list of priorities.
Whenever you apply for any type of credit your credit report will be pulled. Having too many "pulls" on your credit can drastically lower your score, even if you do not open any new accounts.
You can also get a secured credit card. These are a great way to establish credit and are the easiest to get. You can do some research online to find banks that offer them.
I suggest you should first get a copy of your own credit report before applying for any loan. That way if there are any errors, you have time to dispute them. There are a few simple ways to build up your credit.
1. Establish a budget for yourself. Keep track of your spending.
2. Make sure to pay all of your bills on time.
3. Get a credit card, even if it’s a secured one.
(Hint: Every time you use your card, deduct the purchase amount from your checking account balance. Then, when the bill comes in, you already have the money to pay the bill in full).
Remember, there are not any fast ways to clean up your credit. By following these simple rules, you will surely establish yourself as credit worthy over time.
If you are having a difficult time establishing credit, or re-establishing credit one option you may want to explore is applying for a Secured Line of Credit. In this type of loan you would be offering the bank some form of collateral to secure against the loan.
