It goes without saying, credit affects so many different areas in our lives. Us women like knowing that we have a good credit rating as much as we love our Louis Vuittons, and of course any savvy girlfriend would know that a good FICO score is just as important as having a healthy social life. So we try to make payments on time and avoid being over the limit. It’s easy to succeed at these goals, most of the time, but what many do not know is that there are several other factors that can affect our scores. How it works can be a little complicated for most of us but knowing a few guidelines by heart can save us from the nightmares of a bad FICO rating.
Check your current credit report for errors.
Perhaps, you knew by now that you are entitled to get a free copy of your credit report. Though results are consolidated from the 3 nationwide consumer credit reporting agencies, TransUnion, Experian and Equifax, it does not mean it is error free. In fact, a 2004 survey announced that these errors happen 79% of the time. Go over your latest copy in a needle point manner. If any questionable derogatory facts are found,lowered credit limit figure vs. current actual credit limit or on time payments that were marked as late, gather supporting bank documentations, dispute with the responsible credit reporting agency and get them corrected fast.
Pay on time. Schedule them on an automatic basis.
As we all know, any delayed payments are undesirable as far as anyone’s credit score is concerned. Though some banks may submit late payment information after 60 days past due date, but this cannot be relied upon because banks may change terms and policy at any time. If the current budget does not allow big payments to lower the existing balance, the timely minimum payments works best and make arrangements for automatic payments, in order not to miss a due date.
Smart managing of existing balances, multiple and high
Payment performance can also be assessed upon how single or multiple balances are managed. This includes keeping your balance way below the credit limit. Spreading your balances around, not relying on a single balance transfer to consolidate all accounts. Making early payments before the end of the statement period can also give a good impact.
Select wisely in closing accounts
Keep old accounts active and if ever closing an account is needed, choose recently opened ones. Keeping an old account establishes age of credit history and closing old accounts shortens it.
Use old cards
As observed during the past 4-5 years, banks have been closing inactive accounts and these events adversely affect credit scores. If you have a dormant credit card, use it at least once a month to keep it active, which would advertently fortify your credit history, making it appear desirable and long paving the way to a higher credit score.
Ideal borrowing or “Loan Behavior”
Another way of describing a good credit score is responsible borrowing. In lay man’s terms, not borrowing too much and paying back the borrowed amount in time. Multiple new borrower accounts affects the age of your credit history as risks increase. Open new accounts conservatively, only when necessary. There would be a right moment to scout around for loans and work around the consequent credit score reduction that follows right after a lender inquires for your credit rating to gauge your credit worthiness. Too many lender inquiries would indicate the number of attempts to borrow money and this is not desirable to your credit score.
Loan shopping is best done within 14 to 30 days. To FICO, this would appear as inquiries bunched together, may at times be counted as one, and taken as reasonably generated- like shopping around for the best auto loan, mortgage and applying to different credit sources in a short span of time.
Credit is good, but never fall in love with it. FICO scores are grades given to your payment performance in review of creditworthiness. It is a major factor in our financial lives. In any perspective, this article is all about building a strong credit history. To others, it fortifies and to others, rebuild as it can be repaired. Do not fear or panic if you have any “damage” in your credit report today, with responsible actions and attitude, it will be rebuilt with time.