Steps to Improving Your Credit Score

It is undeniable - we are facing some hard economic times. In these times it is imperative that you keep your credit score as high as possible if you have any goals of buying a house or a car or anything else that will require lending. There are 6 key steps that you should strive to take in order to ensure the best credit score possible.

1. Reduce your open credit card utilization as much as possible

This may be the most important factor of all in boosting your score. If your credit cards are maxed out, you will be viewed as a high risk by many lenders. Strive to keep your utilization below 20% - if you're already there, great! If not, put every extra cent you have towards reducing your utilization.

2. Make sure to pay all of your bills on time

This one is a no-brainer. If you establish a good history of on time payments, lenders will view you as having less risk and more credit worthy. Late payments can retain on your credit report for 7-10 years, so make sure that you keep up with the due dates!

3. Don't close your old accounts!

Another important factor to your credit score is the average age of your accounts. By keeping an old card open that you don't use, you add history to your report. If you were to go and close this account, your average history would be reduced thus decreasing your score.

4. Have a good variety and number of open accounts

This tip does not carry as much weight as some of the others mentioned above, but is also important. By carrying a mix of revolving (credit card) and installment (student loan, car loan) loans and paying them on time, you show that you are able to maintain responsibility which will increase your credit score.

5. Keep your hard credit inquiries to a minimum

This number resets every 2 years. You should strive to keep the number of requests for hard inquiries to under 2 in this time period if possible. Every time you apply for a credit card or a loan, this number is increased, which will slightly hurt your score.

6. Don't rack up any derogatory marks

Items such as bankruptcies, accounts going to collection, liens and civil judgments can devastate your credit score. Make sure that you live within your means and pay everything on time. These marks could take up to 15 years to be removed from your report so prevent them as much as possible!

Follow these 6 steps and start on your way to financial freedom!

Brad @ Whatisagoodcreditscore.biz.

Tricks Credit Card Companies Use

Many credit card companies offer cards that reward you with frequent flier miles or money towards the purchase of a new car. But you should study the terms carefully because if you don't qualify, they have been known to send a completely different card with different terms. Before you pay more in interest, cancel the account immediately. You should also avoid zero-percent offers because there's always a big catch especially if you miss a payment or when the introductory period ends and the rate goes sky-high.

They have fees to charge for nearly every situation. Some charge a late fee if your monthly payment isn't received by a specified time on a certain day. Check your statement for due dates and times. Watch for over-the-limit fees and transfer fees if you're transferring a balance from another credit card. If you're maxed out and the new credit card has a lower limit than you think, you'll be hit with an over-the-limit fee and possibly a higher interest rate as a consequence for going over. Also be sure to ask how long the new credit card's introductory rate will last. Usually the rates are only good for six months. Taking cash out of your credit card is a bad idea because the rate for cash advances is much higher than it is for purchases and there is no grace period, you start paying interest right away. Credit card companies also stick it to you when you vacation abroad. Visa and MasterCard both charge a 1 percent currency exchange fee and some major banks charge a 2 percent fee on credit card and debit card purchases made outside the United States.

These companies are also notorious for changing their payment P.O. Box. When you send your payment to the old address it meanders around their headquarters before finally making its way to the payments department who then charges a late fee. Check the mailing address each month, pay early and consider paying online to avoid this situation.

If your payment was late last month, the company may have forgiven the fee but you may see an increased rate on next month's statement because you were late on a payment. Credit card companies frequently check your credit report for late payments on auto loans to justify rate increases. Remember fixed rates really aren't fixed. By law, credit card companies must give you 15 days notice before they raise your rate. They don't need a reason and if you call them and ask them to lower it, they don't have to do it. If your credit card company resorts to these tactics, the best thing you can do is get a new card and cancel the old one.

Avoid buying insurance. If your card is stolen, you are only liable for up to $50, making theft insurance a needless expense. Disability insurance through your credit card company will only make your debt worse, if it ever kicks in.

There's a reason these companies set the minimum payment at 2% of your total debt. At that rate you'll be paying it down the rest of your life. Pay as much as you can with the goal of paying off the entire balance as quickly as possible. Another trick is shrinking the grace period between the statement date and the payment due date so that by the time you get your bill, you're already paying interest on the balance you carry.

Finally, you need patience, persistence and a good sense of humor to deal with customer service agents who will transfer you, put you on hold and even hang up on you until you are blue in the face.

Negotiating with credit card companies is exhausting but can save you money in the long run. This savings will help your pocketbook, help your credit score, and make it easier to get a military loan.

Fix Your Credit Report Yourself!

You may think you know your credit history, but surprises lurk. Before applying for a loan, a line of credit or even for a job, you should take a look at your credit reports to make sure there are no errors.

If you have already been turned down for credit the company would have to let you know in writing which agency had negative information on you. With letter in hand, you could call the agency and ask for a free copy of your credit report.

There are three credit reporting agencies and they store separate scores sometimes with a wide margin between them. Each report could show different errors. Mistakes happen fairly often so check the report carefully starting with your personal information like your name, your date of birth and your Social Security number.

Then you check the information on each account. You may find that a loan you had paid off long ago is still listed and still active. The account may be in the name of a family member or someone with the same name as yours.

Check that there is only one account for each creditor. You will want to check that there is no one else using your credit. If you are a victim of entity theft, the sooner you discover this and start to clear this record, the better off you will be. Identity theft can cost you about 180 hours to deal with the matter and around $1,000 in costs so that alone is a good enough reason to check your credit history on a regular basis.

Checking your own credit report will not have a negative impact on your credit score. To get your free credit report, go to http://www.annualcreditreport.com. Or you can phone toll free 877-322-8228. As the name implies, you are entitled to one free credit report per year.

If you find something, find proof of the error and send it via certified mail to the credit agency that has the error. The address of the bureau is on the credit report.

They have 30 days to ask the company that placed the negative information to submit their rebuttal. If the company doesn't respond within 30 days, the credit bureau has to remove the negative information.

If you find enough of these errors, you will see a good improvement in your credit scores in about 30 days after that. You can decide if you need to work with a credit repair agency to negotiate with your lenders.

You can check out my web site to get the 'civilian's' point of view and research results in navigating the traps of credit repair and the impact of bad credit on your life that you may not have been aware of.
Please go to http://www.fixmycredithistory.com/ to get the latest information.

Aspects to Your Credit Score

Have you got a copy of your credit score yet? Do you know what the 5 components are to your score and how much each one is worth?

As you well know, your score is a 3 digit number that the credit bureaus use to determine your credit worthiness.

It's like a financial report card; the higher the score the better your credit.

The bureaus won't reveal the exact formula used to calculate your credit score, however they have revealed the 5 major components that make up the formula.

Each area is assigned a specific percentage that contributes to your overall score.

Payment history: 35%

Amounts owed: 30%

Length of credit history: 15%

New credit: 10%

Types of credit used: 10%

Now that you know what the 5 components are, let's look at how to improve and increase your score with each one.

Payment History:

This area makes up the largest portion of your score. It makes sense that missed payments will affect this part of your credit score, but did you also know that a late payment has much the same affect?

The credit bureaus view late payments pretty much the same as a missed payment, even if it's just a few days late. So if you think that holding off your payments for just a few days more won't hurt your credit score, it will.

So do you best to make your credit card payments on time, even if its just the minimum required amount.

Amount Owed:

This is basically the amount of money owed vs. the total amount of available credit in all your active accounts. The number that the credit bureaus like to see is somewhere between 30% and 50%.

So if you have $10,000 in total credit but only have $4000 total owing, your debt to credit ratio would be 40%, which puts you in a good spot with the credit bureaus.

The other thing to factor in here is the number of accounts open. You should have about 2-3 accounts to demonstrate that you are a responsible credit card holder; any more that this and it might look like you are over extended, which will hurt your credit score.

So to recap, keep the amount of debt owed vs. your total available credit to under 50% and try and have at least a few active accounts so you can add positive history to your credit file.

Length of Credit:

Does size matter? You bet it does. The third most important factor when it comes to your credit score is made up of 2 parts; the first is the length of time since your first credit account was opened and the second is the average length of time your accounts have been opened.

In both cases you want to have a few well established accounts on record. So if it's been a few years since you've opened an account; great. But try to avoid opening any new accounts unless you really, really have to because this will lower the average overall length of your credit accounts.

New Credit:

As I just said, adding too much new credit to your file actually hurts your score in 2 ways. The first way is that ever time you apply for new credit, a credit inquiry is pulled against your file which damages your account and lowers your score.

The second way that new credit affects your score is that it lowers the overall length of established credit on your file. Each time a new account is open the average length of your established accounts drops because the new account is now taken into consideration.

If you take only one thing away from this section, let it be this. Before you apply for any new credit, try reducing the amount you owe on your open accounts. You'll free up credit and add positive credit history to your file at the same time.

Type of Credit:

The bureaus like to see that you're responsible when using credit and they like to see diverse types of credit on your file.

Having many different types of credit i.e. credit cards, line of credit, installment debt, etc gives your file some teeth. The bureaus want to see that your availing yourself to their services but at the same time not overextending yourself, so try and keep your balances vs. what is available to you at a minimum.

Remember these 5 components of your credit score the next time you go to open a new account or apply for a credit card. Depending on your situation, it might hurt or help your credit report.

Aspects to Your Credit Score

Have you got a copy of your credit score yet? Do you know what the 5 components are to your score and how much each one is worth?

As you well know, your score is a 3 digit number that the credit bureaus use to determine your credit worthiness.

It's like a financial report card; the higher the score the better your credit.

The bureaus won't reveal the exact formula used to calculate your credit score, however they have revealed the 5 major components that make up the formula.

Each area is assigned a specific percentage that contributes to your overall score.

Payment history: 35%

Amounts owed: 30%

Length of credit history: 15%

New credit: 10%

Types of credit used: 10%

Now that you know what the 5 components are, let's look at how to improve and increase your score with each one.

Payment History:

This area makes up the largest portion of your score. It makes sense that missed payments will affect this part of your credit score, but did you also know that a late payment has much the same affect?

The credit bureaus view late payments pretty much the same as a missed payment, even if it's just a few days late. So if you think that holding off your payments for just a few days more won't hurt your credit score, it will.

So do you best to make your credit card payments on time, even if its just the minimum required amount.

Amount Owed:

This is basically the amount of money owed vs. the total amount of available credit in all your active accounts. The number that the credit bureaus like to see is somewhere between 30% and 50%.

So if you have $10,000 in total credit but only have $4000 total owing, your debt to credit ratio would be 40%, which puts you in a good spot with the credit bureaus.

The other thing to factor in here is the number of accounts open. You should have about 2-3 accounts to demonstrate that you are a responsible credit card holder; any more that this and it might look like you are over extended, which will hurt your credit score.

So to recap, keep the amount of debt owed vs. your total available credit to under 50% and try and have at least a few active accounts so you can add positive history to your credit file.

Length of Credit:

Does size matter? You bet it does. The third most important factor when it comes to your credit score is made up of 2 parts; the first is the length of time since your first credit account was opened and the second is the average length of time your accounts have been opened.

In both cases you want to have a few well established accounts on record. So if it's been a few years since you've opened an account; great. But try to avoid opening any new accounts unless you really, really have to because this will lower the average overall length of your credit accounts.

New Credit:

As I just said, adding too much new credit to your file actually hurts your score in 2 ways. The first way is that ever time you apply for new credit, a credit inquiry is pulled against your file which damages your account and lowers your score.

The second way that new credit affects your score is that it lowers the overall length of established credit on your file. Each time a new account is open the average length of your established accounts drops because the new account is now taken into consideration.

If you take only one thing away from this section, let it be this. Before you apply for any new credit, try reducing the amount you owe on your open accounts. You'll free up credit and add positive credit history to your file at the same time.

Type of Credit:

The bureaus like to see that you're responsible when using credit and they like to see diverse types of credit on your file.

Having many different types of credit i.e. credit cards, line of credit, installment debt, etc gives your file some teeth. The bureaus want to see that your availing yourself to their services but at the same time not overextending yourself, so try and keep your balances vs. what is available to you at a minimum.

Remember these 5 components of your credit score the next time you go to open a new account or apply for a credit card. Depending on your situation, it might hurt or help your credit report.

The Ins and Outs of Credit Bureaus

Credit bureaus play an important role in your financial life, acting like a warehouse, collecting information about all your financial activity such as when you take a loan out on a car or apply for a new credit card. Lenders are the suppliers of this information and not only report transactions that are favorable to your credit but ones that may be not as favorable such as late payments of bills and large debt. Public records are another source of information for credit bureaus and they use all this material to create your credit report and scores.

The material that is stored in credit bureaus falls into several categories. There is personal information such as your name, social security number, date of birth, addresses at which you have lived and a history of your employment. If you have had any activity in a court system with regard to financial judgments, such as a bankruptcy, tax lien or foreclosure, then this information is maintained by the credit bureaus. They also keep track of every inquiry someone makes about your credit report and scores but the greatest amount of information that they store is that which about your loans and credit cards. This can include details about the type of loan or credit card, the date the account was opened, the account or loan balance, the status of the account or loan, payment activity, comments and your liability on the account. Negative items which have been closed out are usually not part of your credit report and scores.

The three major credit bureaus are Equifax, TransUnion, and Experian. Any one of these companies can be used by a lender to obtain your credit report and scores. The companies simply provide the information that is contained in your credit report and scores to the lenders who then make the decision about whether or not to provide you with a loan or to let you open a new credit account. Credit bureaus play no role in making these decisions as they only provide the requested financial reports and scores and do not make any judgments about your credit rating. The final decision always remains with the lender.

Credit bureaus tend to have a bad reputation but when they are working properly, they can be very helpful when you have a financial need. The information they hold in their credit report and scores enables you to borrow money from lenders and institutions with which you may not have any history and can also help you to get a better rate on a loan, for example, if this information shows that you have paid your bills on time, borrowed responsibly and maintained a low balance on your credit cards. Credit bureaus can also help you if you find errors on your credit report and scores and are obligated to fix them within a specific period of time.

The time to take back control of your credit reports and scores starts now. You can follow up with this article by visiting http://www.creditreportsandscores.org/ to learn more.