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Posted on Monday, September 27th, 2010 at 2:45 pm
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Top GraphicUnderstanding of Credit Score and How to Protect It
Having a good credit usually means smart financial planning. A good credit score can save you a ton of money in long term especially when you have to purchase big ticket things such as a house or a car. For example, having an a high credit score could mean no or low down payment, reduced monthly payments, and reduced interest that you have to pay. Other advantages of having a good credit score is also for employment and lowering your monthly insurance premiums. Companies with high profile job openings would take a look at your credit score as a requirement for employment. These work opportunities are mostly in financial sectors that would require this. Insurance companies also provides lower premiums for people with good or excellent credit scores.
There are a lot of ways that you can improve your credit rating. While most people go through those credit repair companies, you do not need to use those companies to improve your credit score.
Below are the most common ways to improve your credit score:
Keep An Eye How Much You Owe on Your Credit Card
Please keep in mind that the bigger your total balance as a percent of your aggregate sum of your credit limit across all the credit cards, the lower your credit score would be. Experts say that you lose 1 FICO point for every percent of your credit limit that you use. So if you have a total credit limit of $40,000 and have an outstanding balance of $80,000 (50%), your credit score would be 50 points lower than if you had a $0 balance. Be aware that if you can't pay off your total credit card balance in full, you should attempt to keep it below 30 % of the aggregate total credit cards amounts.
Adjust Your Spending
Payments made to your credit cards may take a a number of weeks to get reported by the lender to the credit agencies. By not charging to your credit card at least sixty days before applying for new loans, chances are that all the payments you have made to date will be shown inyour credit score by the time a lender requests your credit report.
Always Pay On Time
If you can,always pay your credit card account in full and send it as soon as you receive the account statement. If you are unable to pay the balance in full, at the very least pay the minimum amount due.
Limit the Number of Credit Cards Applied in a Short Time
Lenders normally do not like to see a borrower who open new credit accounts in a short time. This is due to the fact that it raises the probability of you unable to pay for the loans.
Avoid Closing Unused Accounts-
Closing a few of your unused accounts will greatly increase the debt to credit limit ratio. Remember the first rule - try to keep your balance below thirty percent of your total credit limit. As an example, assuming that you have 3 credit cards, which have credit limits of $5,000 each but one of them is inactive but the remaining balance is $5,000 on the other two credit cards, closing the inactive credit card would increase your total debt to credit limit ratio from thirty percent ($5,000/$15,000) to 50% ($5,000/$10,000)
Be Cognizant of Your Credit
Always check your request for a credit report and review it for any incorrect information posted. Basically, you can acquire a free copy of your credit report per year form the free annual credit report website. When you request for a report, obtain for your credit score as well, too. In addition, checking your credit report would allow you to see if there are any identity thieves trying to opened or have already opened accounts in your name.
For additional information on credit cards such as Pros and Cons of Costco Amex TrueEarnings credit card and Protect Your Fico Score visit Spruce Up Your Finances.
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