|
[04:59:14 AM Thursday, July 12, 2007]
Tips on Good Credit and Credit Card Offers
One of the funny things about human nature is that most of our problems are our own fault, and all we can do is shake our heads and laugh about them. We’re given advice about things; we don’t heed it; and things go wrong.
This applies to your credit rating, too. We’ve all heard that you shouldn’t count your chickens before they’re hatched, or put all your eggs in one basket, or bite the hand that feeds you. We know that a penny saved is a penny earned, and that it’s better to be safe than sorry. And yet what do we do? We exercise poor judgment and wind up with bad credit.
Everyone understands that having good credit is important. It determines how big our houses are, what kind of cars we drive, even what kinds of clothes and food we can buy. Yet few people really fathom how credit actually works in the USA, much less how to improve theirs. But it’s simple: Most of the tips for improving your good credit boil down to regular old common sense.
7 Tips on Good Credit
*Pay your bills on time. It sounds obvious, but so many people overlook this, or let it slip. Late payments are the number one factor in bad credit. On credit reports, it’s the first thing potential creditors and banks look at when you’ve applied for a new credit card offer.
Don’t let it slide. Pay your bills on time, every month, and period. Automatic payments (where funds are automatically withdrawn from your bank account each month) can be helpful, if sometimes you forget to mail a payment.
* Build up a solid history of good credit. Late payments and missed payments are the two things most often reported to the credit bureaus, but they’re also the things you have the most power over. Build a pattern of paying off your credit card balances every month. That shows you’re responsible and handle your debts sensibly.
One way to put this strategy into practice is to put your daily expenses on your credit card, and take that much out of your checking account when you do. Then use the money you’ve deducted to pay off the credit card balance at the end of the month.
* Get rid of extra accounts. In general, you don’t need more than three or four credit cards, at the most. That gives you some options in how you spend, and also lets you take advantage of benefits such as cash back and airmiles. If you have more credit cards than that, it makes potential banks and creditors wary of extending more credit to you, and it hurts your credit rating.
* Avoid using too much of your available credit. Your debt-to-income ratio is a major factor as creditors determine whether to lend you more money. If you seem overextended, your credit score goes down. One way around this is to pay off your balances as quickly as possible. Choose one to focus on, pay it off completely, and then close the account. Do this until you’re down to a reasonable number of credit cards.
* Don’t get maxed out. As in the previous tip, you don’t want creditors thinking you’ve stretched yourself too thin. If all your credit cards are maxed out, that suggests to lenders that you can’t manage your credit, and that you’re likely to start missing payments or being late. Your credit score will go down if your accounts are maxed out.
If at all possible, keep your balances down around 30 or 40 percent of your credit limit. Anything higher than 60 percent, and lenders get nervous. Your credit report will look much better if you keep those balances low.
* Limit credit report inquiries. Every time you respond to a new credit card offer, the potential lender asks for a copy of your credit report. And every time someone requests your credit report, your credit score goes down. Why? Because looking for more credit is a sign that... well, that you need more credit. It’s an ironic situation:
The people lenders are most comfortable lending to the people who don’t need the money. If you NEED the credit, you’re a bad credit risk. This is especially true if there are a lot of inquiries into your credit report in a short period of time, as it looks like you’re desperately trying to get more credit. Minimize the number of inquiries by not applying for credit cards you don’t truly need.
* Look at your credit report every year. The credit reporting bureaus do their best, but errors still pop up frequently. Examine your credit report carefully at least once every 12 months, and if there are mistakes of any kind — especially the ones that make you look bad — report them immediately to have them fixed.
It’s up to you to see that your credit report is accurate; no one else is going to do it for you. Missing or false information could cost you a new credit card or other important things that you might actually deserve. It’s smart to look at your credit report regularly to watch for identify theft, too.
|
