Your Credit: Five Things To Be AWARE OF!

There are several resources about improving your credit score on the market.  Some of the information is valid while others provide outdated information that is no longer beneficial.  Below please find several tips that everyone should know:

#1 – You are entitled to one free credit report each year.

You can obtain this report at:  Make sure that you obtain information from the three major credit bureaus: Equifax, Trans Union and Experian. 

Reviewing your credit report periodically is recommended since your credit profile is pivotal in obtaining loans, opening insurance policies and even some cases securing employment.

#2 – “That’s not mine”, but……

While reviewing your credit report you may notice that there is an account or two that doesn’t appear to be familiar to you.  Before you place an inquiry about any account like this, review it.  It is possible that removing such an account could lower your credit score.  I know that seems silly, but it is very possible.

Think about this, if there is an account showing on your credit report that has been opened for four or five year and is reporting negatively due to a 30-day lateness three years ago; removing such an account will more than likely lower your credit score.  Get the advice of a professional to evaluate unique situations like this. 

#3 – Keep the line open

One of the largest mistakes that individuals make is closing credit lines.  I understand if there is a student loan or auto payment account that is completely paid that the lender will report the account as closed.  There is little one can do about that.  But the revolving account (credit card) should never be closed even after the balance is zero.  Doing this can ruin your credit score. 

If you have a revolving line of credit that has a zero balance and you rarely use, do not close it.  Here is why:

One of the elements of your credit score weights something called your credit utilization ratio. The credit utilization ratio is calculated by adding the total amount of credit used and dividing it by the total amount of credit available to you.  The higher the ratio the more your credit score will be negatively impacted.

#4 – A phone call can safe your credit score

If you run into a cash flow crunch and think you may be late on making a payment, call your creditors.  There is a possible chance that a payment extension can be worked out, so that your account isn’t report to the credit bureaus as late.  Obviously you can’t use this approach every month, but on the rare occasion that something like this may occur, make the phone call. 

Remember a 30-day late reported on your credit could drop your score significantly.  And it will take a number of months of on-time payments to recover.  One phone call could avoid several months of work.  Make the call. 

#5 – Ask for the help of a professional!

When I purchased my first car I was told that the oil needed be changed every three months or so. I had this magical idea, why would I pay someone to change the oil, it is less expensive to change it on my own.  Once I learned what had to be done and what could go wrong if I did something wrong, my approach quickly changed!  I looked for a professional who knew what they were doing.  

This works the same way with your credit.  Of course you can do it on your own.  Besides you have Google, the Internet, books, blogs, newsletters, YouTube videos, etc. which contain a plethora of information.  And obviously you can read and have the time to navigate all of these resources.  But what happens if you do something wrong.  A good friend’s words ring true here, “if you think it’s expensive to hire a professional to do the job wait until you hire an amateur” or try to do it yourself!