One thing I wish I learned in high school, the importance of having great credit. No matter how much money you have, if you don’t have good credit it’s null and void. You face having high interest rates on loans or having to ask someone to co-sign on a loan for you which most people don’t all jump to volunteer.
I have been working for a financial institution for the last two years and it has helped me in my personal life get a grasp on my own financial hardships and overcoming the struggles of paying bills late or not paying them. How can I tell people the importance of having a positive balanced checking account or why their interest rate increase due to delinquency if I am not doing these things personally? Today I wanted to share 5 tips on how to improve your own credit.
Live Below Your Means. When you get your weekly, bi-weekly, or monthly paycheck you don’t have to spend it down to the last dime and then you have no money until your next check. Always have priorities. Focus on the necessities and worry about the wants later. Whether your food shopping, or clothes shopping always look for bargains, sales, and even check out your weekly ads for coupons. Just because something is on sale doesn’t mean your broke or you’re cheap, it just means you want to get more for your money.
Create A Budget. Each month in your planner, write down all of your bills, from the name of the company, the due date and how much you owe. When you write down all your bills it’s less overwhelming when payday arrives and it is also better to know where your money is going. If your due date isn’t working for you , contact the company to see if you can request a due date change, I have done this with my credit cards and my car loan. I know it can be a lot if your due date falls in the middle of the week, or all of your bills are due at the same time.
Monitor Your Credit Report. You should always know the items on your credit report. You should check your credit report every 30 days. Some credit card companies even offer this service where you can check your report monthly within their website if you have an account with them. A free credit report can be obtained on Credit Karma, and also My Free Credit Report. It always important to know what is being reported on your credit report, from late payments, inquiries, collections, etc. If there is something you do not recognize you can always file a dispute and the credit bureau will investigate for you.
Establish Credit. If you are a newly college graduate and you have nothing on your credit report that shows that you pay bills on time, or even if you’re not someone fresh out of college, if you need to establish credit I would recommend applying for a secured credit card. A secured credit card is a card in which you make a deposit ranging from $99-$1000. Once you make that deposit you can not exceed that limit and you must make the payments on time. When you do this the credit card company reports to the credit bureau payments made on time. Within 6 months to a year you have establish some sort of credit history. What this means is when you apply for a loan and your declined for insufficient history it means you do not have available credit to balance out your debt.
Pay Your Debt/Pay Your Bills On Time. It’s always important to look over your credit report and focus on any items you have in collections. If there are items that are approaching 7 years:
- Let them fall off, paying them off this late in the history can cause the account to reopen and start over.
- Contact the company to see if they are willing to offer you a settlement but make sure on your credit report it shows paid in full.
If you have items that are inaccurate or you do not recall having an account with that particular company:
- File a dispute it will be either be deleted off of your credit report.
- The results of the investigation will provide you the name of the company, the type of account that it is, when it was established and the exact amount that is owed.
If you already have established credit and you have credit cards whether the balance is low or high credit limits do not max out your credit cards this has a negative effect on your credit. You should only use 30% of your limit and try to pay your credit card balance in full each month. When you have a payment due, most credit cards have a minimum payment of $25 due and people say “oh that’s not problem, I can do that”. When you do that majority of that payment goes toward interest and the rest to principal and it’s going to take longer for you to pay off the balance.
Paying your bills on time is very important. That is one of the main factors creditors consider when you apply for a loan/credit cards. One late payment can hurt your credit score tremendously and this is something companies most likely will not remove if you file a dispute for inaccuracy. Most companies do not report late payments to the credit bureau until after 30 days past due.
Tip: When you are applying for an auto loan, take your most recent credit report with you to the dealership so that you don’t have 10 different dealerships pulling your credit because this is considered a hard inquiry and this will bring your credit score down. Inquiries stay on your credit report for two years. Also, when you’re car shopping and you’re visiting different dealerships, if they do not have the car you are looking for, there is no need to fill out a credit application. When I was shopping for a new car a year ago I visited 5 dealerships, I knew what my score was, and I only had 1 vehicle in mind, but I only sat down and filled out a credit application for 1 of the dealerships. I say this because when you fill out a credit application the dealerships shop around to different banks to try to get you approved for a loan and these added inquiries.
I hope my tips helped you all and feel free to share your tips on improving your credit.