10 Keys to a High Credit Score
Knowing how to keep your credit score above average is an important part of our financial health. Creditors want to see that you will be able to pay your debts back. There are a lot of things you can do, but often it is more what you don’t do that can have the greatest effect on you FICO score. Remember that it is important to demonstrate financial responsibility.
Here are the 10 Keys to a High Credit Score:
1. Don’t Avoid Using Credit. If you don’t use credit, you won’t have much for them to score you on. A history of showing the ability to mange debt will help with your score. In no way does this mean you should you max out all the credit cards you can get your hands on. Know your limits. If you have had problems in the past with spending to much on credit credit cards you might need to put away the plastic and make the majority of your purchases with cash or check. Limit the about of credit cards to two or three.
2. Don’t Miss Payments. Paying your bills late will hurt your credit, but if you miss a payment it will damage it even more. If you try to make an extra payment in the next billing cycle it still will not remove the blemish from your credit history. Paying your bills on time determines 33% of your FICO score.
3. Don’t Limit Loan Types. A car payment and a mortgage may not be enough. Also managing an installment debt, such as a credit card, is a good indicator of credit responsibility. This doesn’t mean you need to go out and sign up for every department store credit card out there. There are five elements to the credit score model and revolving credit, which allows consumers to charge and owe different amounts each month, is one of them. “It’s 10% of the score,” says Gail Cunningham, vice president of public relations for National Foundation for Credit Counseling.
4. Don’t Close Unused Credit Card Accounts. Actually, just use caution. A factor in credit score models is your utilization, which is your debt vs. how much is available. For instance, if you owe $6,800 on a card with a $7,000 limit, you’re using most of your available credit and this utilization will have a negative impact on your score. Your available credit utilization is the second highest factor in your credit score. You should charge no more than 30% of your available credit.
5. Don’t Be A Credit Tease. Recent inquiries means that you or someone else has accessed your credit and this can affect your score negatively. It seems ridicules to me that your are docked for shopping around for a good loan, but credit checks can lower your score.
6. Don’t Rob Peter To Pay Paul. Don’t charge anything unless you know how and when you are going to pay it back. One of the benefits of credit is the ability to spread out payments on a big purchase, not to delay paying with hopes that the money will come in – from somewhere.
7. Don’t Get On The Call List. When a debt turns into a collection account, it’s an indication that you got yourself in hot water. Once a collection agency jumps into the arena, it becomes the owner of the debt, which will show on your credit history. Trying to make payments to the original debtor will not make the collection agency or the negative mark on your credit go away.
8. Don’t Forget The Little Things. That library fine you didn’t pay or the health club contract you signed but didn’t honor can show up on your credit report. Any debtor has the right to report unpaid bills to the credit bureaus, and many of them exercise that right.
9. Don’t Negotiate. On paying less than what you owe, that is. If you cannot repay a debt in full and a creditor agrees to settle for less than you owe, you haven’t won the battle. The transaction will be reported as a settled account and this will hurt your credit score. Instead of negotiating to lower the overall amount of the debt, ask to have your interest rate or monthly payment lowered so that you can continue to pay the debt off in full.
10. Don’t Give Up. If you have late payments, missed payments, defaulted loans, and similar credit mess-ups in-between, don’t give up and think that your credit history is ruined. Although offenses like these generally stay on your credit history for seven years, the recovery clock doesn’t start ticking until you have one full month of paying all of your debts on time.
Disclaimer/warning: If you have accumulated a large amount of debt and are looking to increase your credit score only so you can acquire more debt then you need to re-evaluate your strategy and way of thinking. This will only apply to very small portion of people. Most people won’t tell you this but you need to change your life style before you change your credit score. Maybe you don’t need that bigger house or nicer car. Perhaps you should learn to live within your means because if you don’t then you will merely upgrade into bigger financial problems as you go into deeper debt. I know that sounds a little harsh. Some might need a better FICO score to get housing, or buy a used car for transportation. Their are legitimate cases where force beyond your control you have gone into deep debt (i.e. medical emergencies, death of the bread winner in the family, etc. ) I understand that. I only give this disclaimer because we here at Debt-Wrench.com are focus in eliminating the plague of bad debt in your lives. We feel strongly that without the shackles of financial obligation you can be free to live your life to the fullest. We must try try to rid or selves of all the sources of problems. The main problem is the credit card companies, banks, and lending institution.