Credit Score Sucks A**; Now What?

After you read my previous post about credit reports, I’m sure ALL of you rushed out to order your free copy of your credit history! (I can hope, can’t I?) So what if your credit score is less than ideal?

Here are some quick tips for using credit responsibly:

  • All your bills should be paid on time with at least the minimum required payment. Even though most bills are not reported to credit agencies, some cell phone companies may pass along late payment information.
  • Debts should be paid off as quickly as possible.
  • You shouldn’t be maxing out the credit available to you. Try to keep the amount you use (borrowed) under 30% (or even 10%!). The higher the ratio between the amount of credit you are utilizing vs. the amount of credit you have available to you will have an impact on your credit score.
  • To increase your credit score, avoid loan consolidation. This also affects the previously mentioned ratio (amount utilized vs. amount available). In other words, it is better to have smaller balances on a larger number of cards than to have a bigger balance on one card. (No balance is ideal. Just throwing it out there).
  • Understand the difference between hard inquiries and soft inquiries. Whenever you check your credit score, this is a soft inquiry. Soft inquiries also occur when a business you already have an account with checks your credit report, or if a business checks your credit report for promotional purposes. Soft inquiries will not affect your credit score. Hard inquiries are made by lenders. One or two hard inquiries a year are considered normal, so avoid applying for multiple credit products (new credit cards, loans etc.) within a year.
  • A long credit history is beneficial to your score, so avoid cancelling ones with a longer track record

There are no easy fixes to your credit score unfortunately, but it can be done. Ultimately, if you are looking to improve your credit score, one of the first places I would look at would be your spending habits and cash flow, as this would be the root of the problem. Calculate your net worth and set up a budget (even if it is only for a few months) to have a better understanding of where your money is going. One of the things I have learned from working with my clients is that there is a BIG disconnect between what people THINK they are spending, and what they are ACTUALLY spending.

Do you keep apprised of your credit history? Do you have an idea of what your credit score is? Have you ever been refused credit?

I need your help! As this is a new blog, please spread the word on Facebook, Twitter, or email the link to a friend or family member. Thanks for the support!

https://vixymoney.wordpress.com/

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2 Comments (+add yours?)

  1. Mark
    Jan 16, 2012 @ 18:12:00

    Great post Vicky, Thank you.
    -M

    Reply

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