5 Secrets to Earning Great Credit Scores
Love them or not,
credit scores have become an integral part of our financial lives. From
lending to insurance to tenant screening credit scoring models are now one of
the factors used to determine whether or not we’re going to get what we’ve
applied for, and at what costs. It’s in your best interest to earn and maintain
great credit scores, and here’s how:
1. Don’t miss payments, ever.
Both FICO and
VantageScore credit scores consider your payment history as being extremely
influential. In all actuality this category could better be described as the
presence or lack of derogatory information. You don’t ever want to give a
lender an excuse to report something negative to the credit reporting agencies
or your scores could suffer significantly. Late payments, defaults,
collections, tax liens, judgments, bankruptcies, settlements, repossessions,
and foreclosures can all devastate your credit scores for seven to ten years.
2. Avoid too much credit card debt.
Despite the noise made
by some of the self-proclaimed credit experts, credit cards are not bad for
your credit scores. To the contrary, a well-managed credit card portfolio is
actually very helpful to your credit scores. In fact, of the most common forms
of credit (mortgage, auto, student loan, credit card) only the credit card
allows you to choose whether or not you get into debt.
Still, maintaining a
modest balance on your credit cards is a great way to improve your credit scores.
The balance relative to the credit limit is an important measurement in
credit scores. If you can keep that percentage as low as possible, less than 10
percent preferably, your credit scores will reward you.
3. Apply for credit only when you need it.
While applying for
credit isn’t necessarily a bad thing, applying too often suggests that you are
credit dependent and can have an adverse impact on your credit scores. Each
time you apply for credit a new hard inquiry appears on your credit reports.
Hard inquiries are the type that can have an adverse impact on
your credit scores. Note: I used the word “can” instead of “will,” as inquiries
don’t always lower your credit scores.
4. Be careful when closing unused credit cards.
Closing an unused
credit card can, in fact, lower your credit scores. The reason it can lower
your scores is due to the loss of the unused credit limit. As explained in
number two above, having low balances relative to your credit limits is helpful
to your scores. If you close accounts that you no longer use, then you’re no
longer getting the benefit of the unused credit limit associated with that
account.
Note: There are some
people that will suggest that closing credit cards can lower your scores
because you don’t get the benefit of the age of the card any longer.
That’s simply not true. Closed accounts still appear on your credit reports and
you do still get the value of the card’s age. In fact, closed cards continue to
age.
5. Don’t co-sign for loans, ever.
If someone asks you to
co-sign for a loan it’s likely because a bank has denied their credit
application. Asking for a co-signer is their way of making the bank more
comfortable because they’ll now have someone who is actually creditworthy on
the hook for payment. You co-signing for a loan is really no different than you
applying for the loan on your own. Not only will the debt show up on your
credit reports but any mismanagement of the account will also blow back on your
credit scores.
Sign up for
a secured card to help rebuild your credit by clicking on one of our links on
the right or visit the website directly at: www.FreeDebitCardStore.com
Email us at:
info@CherokeeFinancialinc.com
for the opportunity to make money from your excellent credit on any of your
high limit credit cards that have at least 2 years payment history. You'll be surprised to find that doing something
simple that will put money in your pocket to pay down your debt or use however
you want.
