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Understanding Your Credit

Good credit today is an essential part of every day life. We buy so many things on credit from homes to cars, furniture to groceries, gas, clothes, and anything you can think of. That is why your credit is important to you. Information on your credit report can stay on there for up to ten years. Unfortunately, not all of us have the best credit. There are over 2,000 credit bureaus in the United States that are the gatekeepers of you credit. The three major credit bureaus are Experian, Equifax, and TransUnion. They score your credit according to their formulas to develop what is known as Fico Scores. Fico scores usually range from 400 to 850; 400 being lowest score and 850 being the highest score. These credit ratings or Fico scores estimates the ability and willingness to repay a debt or loan.
Can you simply repair bad or no credit? Unfortunately, you cannot. This will take time and patience to repair your bad credit.

Having no credit is almost as bad as having bad credit. Most lenders do not approve people that have no credit history. This is because they do not have any Fico scores. The good news is that you do not have bad credit. You are already ahead of the game if you have no credit. You just have to develop your credit carefully.

If you have bad credit, this may take more time and effort to repair. The first step in repairing your credit is to get a credit report on yourself. Once you obtain your credit report make sure the information on the report is in fact correct, such as your date of birth, your last known living address, the list of all your creditors, and of course your full name.

Some Common Credit Mistakes And Credit Repair

  • Raising Credit Card Limits . Be aware! Credit card companies say they are rewarding your credit history by raising you credit limit. This leaves you open to use your credit more and increase you debt. To refuse this increase of line of credit simply write or call the credit card company and refuse the increase.

  • Not Knowing Your Interest Rates and Fees . Take the time to find out your interest rates and annual fees. (Fact, did you know that about 85% of you minimum monthly payment is interest). If you have high interest rates call the credit company to see if you qualify for a lower interest rate promotion. If not shop around for a lower rate. You would not want to buy a $100 pair of jeans if you can shop around for the same jeans at another store for $30.

  • Not Valuing Your Credit . Good credit is a valuable leverage tool when you make large purchases such as a home, car, or home furniture. Bad credit may slow down or stop you from buying such necessities. Try to budget you short and long term debt so you may increase your Fico scores.

  • Stretching Out Installment Loans To Get Lower Payments . This payment schedule lowers your installment payments but increases the amount of interest you pay over time. Thus, increasing the amount of overall payments over longer period of time. Try to pay installment loans in as short period of time. Be sure to budget your self accordingly.

  • Upgrade Your Credit Card To Gold Or Platinum . Most companies charge an annual fee for these higher status cards. Typically, $50 - $100 per year. Try turning these cards down and keep the use of you credit card for basic needs.

  • Do Not Co-Sign . When you co-sign you are not only responsible for your self, you are responsible for the other person you co-signed for. It also increase your income debt ratio which may count against you if you apply for a car or home loan.

  • Contact Your Lenders If You Change Your Address And/Or Status . When you get married or divorced make sure you change your legal status. If you move update you information with the creditors and the major credit bureaus .

  • Minimum Purchase Rule . Some stores require a minimum purchase per transaction. This leaves the temptation to spend more money when you do not have to. Avoid putting yourself in this situation and avoid the credit card companies that also enforce these rules.

Tips For Keeping And Protecting Your Credit Rating Good

Shop for the best rates and annual fees.Check your monthly statement for any errors.Set aside some money for emergencies every paycheck.Do not over extend yourself. Know what your monthly budget is and stick to it.Try paying your entire bill every month or more than the minimum monthly amount.Send and pay bills 7 to 10 days before the due date to ensure prompt payment.Secure your files and credit cards in a safe place. Protect this information from being lost or stolen.Set you monthly budget or limit.Know what you are signing when you apply or open a new credit card or loan.Pay at least the minimum payment on time.Avoid balance transfers unless you are getting a better interest rate for life. You are only delaying the inevitable.

Check your credit report at least once a year. Make sure all the accounts you have are in fact those accounts that you have authorized.

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