6 Little Known Facts About
How to Raise
Your Credit Score
Most people have very little knowledge about
credit scores and what it takes to maintain excellent credit.
It is not until they're faced with something major, like applying
for a home mortgage, that they begin to understand what they
could have done better. Below you'll find some tips that will
help you get started building good credit sooner as opposed
to later, when you'll need it.
Tips for Building Good Credit
Keep a maximum of 3 different credit cards.
You can still build good credit with just
one credit card, provided you are making other types of payments
such as toward a car, school loan, computer, furniture or
other item. However, if you are not in the phase of life yet
where you need to finance expensive things, it's a good idea
to have 3 credit cards. Having the cards active does nothing
for your score unless you use them. So, work out a situation
where you pay for purchases a, b, and c on one card, x, y,
and z on the other, and so forth.
Pay your credit card bill on time.
With each day that goes by without making
a credit card payment after the due date, you are getting
charged interest. With some credit cards, that interest can
be close to 20%, which is a lot. If you have trouble sticking
to schedules, set it up so that your credit card company can
automatically deduct the payment from your bank account on
the day it is due. But a better way is to mark the day on
the calendar and simply discipline yourself.
Pay more than the minimum each month.
Many borrowers falsely believe that they
can build good credit by paying the minimum due each month.
A better way to manage your finances is by racking up a moderate
balance each month and then paying off that entire balance
by the date when your credit card payment is due. For example,
you can decide that the credit card will be used for groceries,
gas purchases, and miscellaneous items like trips to the drug
store or weekend entertainment. At the end of each billing
cycle, you will have racked up a few thousand on your credit
card. Pay that off and then start clean for the next month.
If you can't pay the entire balance, pay the maximum that
you can afford.
Mortgages, credit card payments and school
loans come before utilities.
We all have those months where money is
tight, or there isn't enough in the bank account at the time
when bills are due. Instead of playing the avoidance game
on all the bills, just pay the urgent ones - the mortgage,
credit card, and any other loan payments that are due. Utility
companies rarely report you to credit bureaus if you skip
a month or two. They know that their power lies in the fact
that can send you a shut-off notice and the payment will likely
arrive.
Don't skip car payments.
Financing a car is pretty much the same
as a mortgage, but on a smaller scale. If you skip a month
or pay late, this is considered being "delinquent"
on your account. Mark on your calendar exactly when your car
payment is due, and have the check in the mail 3 days before
that date. Better still, mark the calendar for 3 days in advance
of the due date, so your payment will arrive on time. Of course,
just like the credit card you can arrange it so that your
payment is automatically deducted from your account. But that
will depend on your personal preference and comfort level.
If you move, be sure that all utilities and
the cable television and internet accounts are rectified.
Earlier, we discussed that it's okay to
occasionally miss a utility payment without being reported.
Remember though, that if you move, your gas, electric, heating
oil, cable company, phone and internet providers will be looking
for that final payment and account closeout. Don't forget
to pay all outstanding balances before you open new accounts
at your new residence. If you overlook such matters, the utility
companies will continue to send invoices and then finally
report your name to a collections agency.
It's never too late to turn over a new leaf
and become a more responsible borrower. However, you don't
want to be caught in a "too little, too late" credit
situation. So if you're not really sure about your credit
score and are making long-term plans to take out a mortgage,
find out what your score is and then take steps to improve
it.
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