Interest rates are at all-time lows but does any of it really matter if you cannot secure the loan that you need? Take an inventory of your accounts before you go out to secure the loan. Here are 5 tips that you need to take notice of to ensure that you are credit worthy.
Do not close accounts that you do not use
This is a big no-no you do not want to close accounts that you have had open for a long time. One of the factors in determining your credit score is the length of time the accounts have been open.Additionally you may think that since the card has a zero balance it would be good to close it. This philosophy while good in theory may not be a good idea because of credit utilization, which simply put is the ratio of balances owed to the credit limits on credit cards. Good credit you would typically have lower credit utilization, if you start closing cards your utilization will go up if you have other cards that have balances.
Pay bills on time
Well this may seem obvious, but maintaining good habits of paying your bills on time will help you build credit worthiness. Even if you are not able to pay the bill in full each month, continue making the minimum payments until you are able to pay down your balance. Even one missed payment can knock off 20-100 points off your credit score. If you have old accounts out there that are way past due it may be in your best interest to contact the lender to see if you can explore settlement. Open unresolved accounts on your credit report are only hurting you.
Get serious about your balances
You need to take ownership of your situation. If you have a credit card problem and you tend to spend a lot, admitting it is one of the first steps. Great you have admitted you have a problem, it is not the end of the world. You may need to seek professional help through a credit counselor to right the ship and get your finances in order. If you feel you can get it under control yourself, even adding a few dollars to your minimum payments each month will start to move you in the right direction and move your score upwards.
You have more than one credit score
There are three credit reporting agencies that your bank or lender may pull the report from. Do not work towards just improving your Experian score when you have no idea which one your lender pulls. The point is you should be practicing good habits that have a positive impact on the score. Each of the 3 agencies has a slightly different way of calculating the score. One agency may penalize you for having no balance while the other may view it favorably. Focusing on good habits and ensuring the accuracy of your credit report will help build good credit habits.
Paying in full each month doesn’t hide high balances on your credit report
Sure the misconception is that using your credit card is great as long as you pay it off each month. Well if you are consistently charging and using a good deal of your credit limit it could actually be hurting you. The credit report only uses the account balance at the time that the issuer supplies the credit data to the reporting agency. This usually takes place after a statement is sent to you. To the agency it looks as though you have a high balance on your cards, because it is not shown anywhere that the balance is paid in full each month.
Now that you have these tips in your arsenal go out there and secure that loan that you need! Any other good tips that I missed?