Learn Your Credit
August 28, 2008
For many credit is a mystery often unveiled only when it becomes a problem. Attractive marketing and a modern society of instant gratification in consumption makes utilizing credit almost a necessity.
Being aware of how credit works and the best ways to establish and maintain yours is something everyone should have a basic understanding of.
The Basics of Credit
It is no secret that paying on time and only buying what you can afford are the main rules to keeping credit in the green. Unfortunately those simple rules don’t always apply in that order of importance in real life. Often credit is used as a supplement to help people get from paycheck to paycheck.
Getting to know the basics of your credit is essential to proper management of your credit history.
The most important factors of your credit in order of importance:
1. Payment history - including bankruptcy and judgments against you.
2. Amount owed - The total amount owed on credit, including auto loans, mortgages, etc.
3. Length of credit history - How long you have been using credit.
4. New credit - New credit applications (even at Target) can detract from a credit score and create problems, apply with caution.
5. Types of credit used - Consolidation or creating new loans to pay off old ones can adversely effect credit scores.
Credit score ratings are based on all of the above factors, knowing your number means you are aware of any issues on your history and can be proactive in repairing it.
Excellent 701-850
Fair 551-700
Poor 350-550
A score under 620 is considered high risk by most credit companies and generally scores under this magic number have difficulty obtaining credit.
Credit Reporting Agencies
There are three big credit reporting agencies and their combined information is generally what is used to determine if you are eligible to purchase big ticket items on credit.
1. Experian
2. Equifax
3. TransUnion
Each agency employs their own methods of determining credit scores, and because they are competitors they offer reports independent of each other.
Tips to Take Charge Now
There are ways to take charge of your credit, and turn it around to work for you instead.
Keep an eye on your report - Get a copy of your credit report and check it periodically. You can dispute errors and often work with a creditor to get your debt paid for a settlement.
Pay on time - Staying current is the key, if you’ve been late in the past, keep paying on time and eventually the good payments will reflect over the late ones.
Don’t use it all - Try not to max out your credit, keeping lower balances reflects positively on the overall score and shows that you are able to manage your existing credit.
Utilize pay as you go or layaway buying plans - Making payments on something to show your good faith until you pay it off is a good step towards repairing issues.
Written by john trapez· Filed Under credit, educatuon , Tags:, learn credit
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