The availability of good credit is critical to developing and maintaining a prosperous lifestyle. Many of us don’t really understand how to build and manage a healthy credit score. Part of this is that we don’t take the time or effort to learn what to do in more detail, and the other part is that when we do, we encounter a lot of complexity. I sat down with Valeri James, owner of Simple Credit Consulting/Training Inc. and asked her for some basic tips, this is what she had to say;
1. Always pay bills on time!
2. Always live below your means!
3. Save money in a savings account for small or large purchases. If we don’t need it, please don’t buy it! If we want it, let’s save for it!
4. Review your credit reports every 6 months for errors, inaccuracies, misleading information, duplicate items, and outdated negative credit. A FREE credit report can be obtained once a year online at: annualcreditreport.com. If you want to get your credit reports more than once a year, you can buy them for about $9 from each credit bureau. If you get your credit reports at annualcreditreport.com or from one of the credit bureaus, your scores will not go down.
5. Keep credit card balances down to about 1/3 of the limits. Never exceed this amount and never max out your credit cards, this will result in lower credit scores. Be aware of your credit limits, be aware that some credit card companies are lowering consumer limits for no reason and without notice.
6. Have two or three revolving credit cards open at any given time. Having too many revolving credit cards open, even if they have a zero balance, shows that you could be out tomorrow and cause your credit card limits to run out. Older ones give you a higher credit score. Loan companies look at the time period of open credit card accounts. They typically look for at least a year or two of paying their payments on time.
7. If you have your social security number on your driver’s license, change it to a regular computer-generated number. If you lose your driver’s license, you have all the information someone needs to take your credit identity, that is, they can use your information to get credit, buy things online, get credit cards, etc.
Removing the social security number from your driver’s license will also prevent car dealers from running your credit reports without your authorization. Some dealerships will ask you to provide your driver’s license for insurance purposes, but they actually use your social security number, name, and address to run a credit report on you to see if you have enough credit before spending more time with you.
8. Opt out of pre-approved spam by calling: 1-888-303-7722
9. Don’t casually apply for credit or freely give out your social security number. Credit applications appear as inquiries on your credit report, indicating to lenders that you may be taking on new debt. Tip: Insurance companies now require your social security number just to give you a quote. Don’t allow your credit to be drawn frequently (known as a hard draw); Your goal here is to prevent excessive inquiries from showing up on your credit reports that hurt your credit scores.
10 Lenders want to see stability. This means living in one place for more than 2 years, staying in the same job/career for more than 2 years, etc. If you think you will be moving, get a PO Box to make it look more stable.
eleven If you have any collection accounts, negotiate for a smaller amount (called a settlement of your debt). This will save you money, but understand that this does not mean that the item will be removed from your credit report. It will show “collection paid”, however this is better than “collection open”. You can/could do some credit repair to remove derogatory items from your credit reports when they are paid or not paid. Federal law, the Fair Credit Reporting Act, says in section 611 that if something on a credit report is inaccurate, outdated, duplicate, misleading, or unverifiable, the item must be removed or corrected. By law, it is the consumer’s right to have an accurate credit report. The statistics are staggering in terms of the number of errors the bureau makes on people’s credit reports.
12 Also, if you have collection agencies calling you, you should exercise your right under the Fair Debt Collection Practices Act and ask them to “validate the debt.” This will accomplish 4 things: 1. make this unknown company prove that it has the right to collect the alleged debt; 2. have the unknown company prove that the debt is valid; 3. prevent them from making harassing phone calls; and 4. prevent them from putting another negative mark on your credit report.
Valeri says that any change to our credit report can dramatically affect our scores. For example, simply closing two accounts not only reduces the number of open installment accounts (which will generally improve your score), but also reduces the total number of all open accounts (which generally lowers your score). In addition, such action will affect the average age of all accounts that could increase or decrease your score. As you can see, a seemingly simple change actually affects a large number of items on your credit report. Therefore, it is impossible to provide a 100% accurate assessment of how a specific action will affect your credit score.
The scores are as follows:
700 – 850 Excellent: These types of scores can get you the best possible interest rates
621 – 700 Good: You can get loans, but you may be subject to higher interest rates
561 – 620 Fair: A loan is possible, but you will pay higher interest rates and more down payment
300 – 560 Poor: You definitely need to improve your score to be able to get a loan
With over 25 years of experience as a Certified Credit Consultant™, Valeri A. James has helped thousands of consumers improve their credit reports by removing or correcting the following items on their credit reports; foreclosures, short sales, bankruptcies, late payments, tax liens, collections, charge-offs and more. This is possible thanks to the use of 3 federal laws.