10 Things You Must Do To Get A Great Credit Score.
1. Avoid Credit Score Scams. While those 3 young men singing a catchy tune about a "free" credit report on television advertisements might seem harmless, the intent is to lure you into paying for your supposedly "free" credit report. While you will need a copy of your credit report before you begin to repair it, there is no need to pay. Federal law mandates that you are entitled to one free copy of your credit report every 12 months. The website to obtain your free credit report is AnnualCreditReport.com.
2. Get Professional Help. Once you receive a copy of your credit report you will need to determine whether to attempt credit repair yourself, or whether to get help with it. If it is more than you can handle on your own, consider enlisting the services of credit repair professionalsls. The experts at Veracity Credit Optimization specialize in helping people repair their bad credit. They are highly recommended.
3. Learn Everything You Can About The Credit Scoring Process. If you choose to undergo the credit repair process yourself, you'll need to learn everything you can about credit scoring and the credit repair process. There is a Free Credit Repair Kit currently available that contains a wealth of information. This is an excellent way to get started with your credit repair education.
4. Don't Use Credit Cards To Finance The Purchase Of Consumer Toys. The first step in repairing your credit is to stop using credit cards to finance things that you do not have the cash to pay for. The bottom line is that if you don't have the money to purchase that latest electronic device that you want, you shouldn't charge it on your credit card. Doing so can be very habit forming, and will burden you with excessive debt as well as interest charges. The less credit card debt that you have, generally the higher your credit score will be.
5. Get Your Credit Card Portfolio Established, Then Leave It Be. There are very good reasons for this. Your credit score will be negatively impacted by constantly changing credit card accounts. Long-term stability is rewarded by the credit risk formulas. Who would you rather lend to, a person who has had the same credit card account for the past 10 years and has always made payments on time, or a person who opens and closes a different credit card account every month? Which person do you think is more likely to pay you back?
6. Stop Applying For Additional Credit. There are two types of inquiries into your credit background: soft and hard. A soft inquiry is more like a review. It does not effect you credit score. A hard inquiry is what a lender will do when you apply for credit. Too many hard inquiries in a 12 month period of time will lower your score. Try to keep the hard inquiries to 1 every 12 months.
7. Don't Close Accounts That You No Longer Use. The formula to determine your credit score takes into account the length of time that a credit account has been open. The longer the better. This shows long term stability. Even if you no longer use a credit card, it will be better in terms of your credit score to keep the account open rather than close it.
8. Use Your Credit Cards Every Month. Ideally, you should use each credit card a small amount each month. This shows that the account is active and has activity. When you use each credit card every month for a small purchase, such as a gallon of milk or a movie ticket, it creates a track record. It is better to use the card for a simple $5 purchase every month than not use it at all. Activity is better than no activity. However, for the highest credit score, you should pay the entire bill off every month.
9. Spread Your Balances Out Among All Your Cards. If you cannot pay your entire balance off every month, it would help to spread the balance to several credit cards rather than just keeping the entire balance on the card with the lowest interest rate. The credit formulas will score you much higher if your outstanding balance is less than 25% of the available balance. Spreading your balance out among all your cards may cost more in interest, but it will help your credit score. It is up to you to decide if the higher credit score is worth the additional interest cost.
10. Pay Off Your Entire Credit Card Balance Every Month. This is so important and so beneficial, yet so few people do it. The ones that do are the ones that have mastered financial self-discipline and reap a lifetime of rewards. Have you ever seen car dealerships advertise zero-interest loans on certain vehicles. While the offers are valid, most people don't have a credit score high enough to qualify for the teaser rates. And that's what they are: teaser rates. You may not qualify for the zero-interest deal, but even if you don't, the dealer got you into the showroom to find out. And that is the biggest hurdle in selling you a new car. However, if you do pay off your credit card balances every month, you will likely develop that very high credit score. Not only will you qualify for the best rates on your car financing, you'll also qualify for the best rates on your home financing. It's win/win in all cases.
The bottom line: use credit wisely. It is much easier to maintain a high credit score than it is to repair credit once your score is dismal. If you want to qualify for a mortgage to buy your first home, don't use credit cards to buy things that you cannot afford to buy. Learn to make credit cards a tool for furthering you towards your financial goals, and not simply a means to acquire more goodies that you really cannot afford. Fail to do that and you'll likely end up a tool for the credit card companies to use to make outrageous profits for their upcoming quarterly report.
Additional Credit Repair Resources
Listed below are a variety of resources relating to credit repair:
Federal Trade Commission document about Credit Repair
Mortgage Terms Glossary |
Home Buyers Loan |
First Time Home Buyer Blog |
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