Credit Scores: What You Can Do To Imrove Yours
September 27, 2008
More than two-thirds of Americans don’t even know what a credit score is, says a recent Consumer Federation of America survey. Basically, good credit scores mean you’re likely to repay a loan and bad credit scores put you into a high risk pool as a potential borrower, hurting your chances of receiving an offer or even a good deal on your next credit card. Your credit score is based on your payment history, how much debt you have, how much credit you were offered and how frequently you borrow.
The most common way people get poor credit scores is to miss a credit payment or to pay late. At the time you may think, “Who cares if it’s just a few days late? They’re still getting their money.” However, once that lateness or missed payment is reported, a credit score can drop as much as 100 - 150 points and will take 24 months to be fully restored. To remedy the situation, be sure you bring all your credit accounts current, paying off late payments and always paying at least the minimum monthly fee, rather than waiting to pay it all at once. For many people, paying automatically through debit or setting a monthly cell phone reminder a week in advance are the best ways to ensure bills get paid on time.
In some situations, getting new credit cards is a good way to actually improve credit scores. If any of your cards have double digit interest rates, it’s best to shop around for a better rate. Sometimes you can consolidate several other cards onto one low-rate card, like a Virgin Credit Card, which offers 15 months interest-free and a transfer fee of 2.98%. Another is Barclays, which has 14 months interest free and a 2.9% fee. However, be careful if you choose this route because your interest rate will be hit very hard if you miss even one payment. Also be aware that applying for numerous credit cards in a short amount of time will bring down a credit score as well. If you’ve had big trouble in the past, then you may want to look for a secured credit card, which is sort of like a debit account: you pre-pay and can only borrow what’s guaranteed in your account, yet the positive activity is reported to the credit bureau.
The most recent activity will weigh the heaviest on your credit score. For example, 40% of a credit score is based on the last year, 30% on the last 13-24 months, 20% on the last 25-36 months and 10% on the last 37-plus months. The good news is that the negative credit will not stay on your report forever. After 7-10 years from the time your accounts are closed or satisfied, the information will be removed. Good credit, by contrast, will remain indefinitely on your profile. If you think you cannot make the adjustments yourself, then you may want to hire a credit counselor to go through your credit report, make the necessary adjustments, bring your files up to date and set you on a path to success.
Tags: credit report
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[...] max out your credit cards. If you’re using over 30% of your available credit limit, then your credit scores will go [...]
[...] max out your credit cards. If you’re using over 30% of your available credit limit, then your credit scores will go [...]
[...] your credit cards as well. If you’re using over 30% of your available credit limit, then your credit scores will go [...]