8 Steps to Healthy Credit
In tough economic times like these, it can be hard to keep up with bills and loan payments. Missed payments will affect your credit rating - and if you let your credit score drop, you'll pay higher interest rates on future mortgages, cars and credit cards. A poor credit rating may also reflect badly on you when you apply for car insurance, rent an apartment or look for a new job.
Clearly, it's worth the extra effort and financial discipline to keep your credit healthy. Here's how:
- Get your free credit reports. A new law entitles every American to one free credit report from each of the three major credit-reporting agencies every year. Go to AnnualCreditReport.com and complete a short survey to obtain your free reports from Equifax, Experian and TransUnion.
- Guard against Identity Theft. Check each credit report carefully for discrepancies and any signs of accounts opened without your knowledge, indicating identity theft. Report any discrepancies and put a "fraud alert" on your report. Go to the Federal Trade Commission website and fill out an "ID Theft Affidavit" form to help you fight disputed charges.
- Close unused accounts. If you have old credit cards you don't use anymore, don't just cut them up. Call the issuing bank or store and cancel them. Too many credit sources showing up on your credit report will lower your credit score. Note that closed accounts may still appear on your report for several years.
- Resist new credit card offers. Don't open new credit cards just to get an additional 10% off on a sale. Your credit score will suffer if you have numerous requests for new credit cards. Four to six credit accounts is enough to demonstrate a good record of on-time payments and responsible usage. To stop getting new credit card offers, call 1-888-5OPT OUT to be taken off the mailing lists.
- Pay all of your bills on time. Many credit scores get lowered because people merely forgot to mail the payment or make an online payment by the deadline. When you get your bill, check it over immediately for false charges or other discrepancies. Then write a reminder in your calendar of when that payment must be mailed or paid online.
- Never exceed your credit limit. Regularly running up your cards to the limit not only reflects badly on your credit report, it also leaves you financially strapped in the event of an emergency. Always leave a cushion of at least 15 percent.
- Make more than the minimum payment. Not only does it help your credit, it makes good financial sense. By paying the minimum only, you are compounding the interest you'll pay and extending the time it will take to pay off even a modest balance.
- Create a budget and stick to it. Begin by tracking your income and expenses on a Cash Flow Worksheet. From there, see where you can cut expenses or increase income to lessen your reliance on credit.
Question: How do you keep your credit rating high?
