Posted 25 days ago

Mend Your Spend For Better Credit

“Tough times never last, but tough people do.” - Dr. Robert Schuller

Your new mortgage company sticks you with high interest. The best credit cards are out of your reach. You finally found that great new car and your loan application comes back with a big fat DENIED. None of these are situations anyone wants to find themselves in.

And feeling like you have the plague when it comes to people lending you money or trusting you to pay your bills stinks (just like your credit).

But, you CAN fix it… if you start putting time and money to the right uses...

Know the score
First, do not jump to use a credit repair company. A lot of what they do, you can do for free. Save your money, at least initially in your repair process. You’re going to need it.

Second, don’t beat yourself up. Maybe in the past, you spent too much or didn’t pay bills on time. You’re not alone: More than three out of five American adults say they carried credit card debt within the last 12 months – and more than one in four admit they don’t pay all their bills on time.

Figure out where you went wrong later – the boat’s leaking and now is the time to bail out and patch the hole.

The clearest indicator that your credit has sunk is your credit score. One commonly used credit-scoring model is the FICO score, courtesy of a California credit-score software company started decades ago as Fair Isaac Corporation.

Scores are generally between 300 and 850. Guess which number you want to be closer to ...

Your score is kept by the credit bureaus Equifax, Experian, and TransUnion (there are others, but those are the big three.) and provided to those who make decisions about lending to you.

A lot of past money mistakes can ding your credit score: spotty bill paying; bankruptcy; using too much of your available credit; or even having too much of just one kind of credit (only cards, for instance, or having no long-time bill outside of a mortgage), to name a very few.

Most American adults have a “good” score topping 700 – but in the end, lenders decide what score works for them. Sounds unfair, doesn’t it? Not to mention the fact that some West Coast software company you never heard of gets to say if you get financing for that new car – or even pass muster for a new job.

Yeah, it’s unfair, but right now the name of the game is "bail and patch."

Where your bucks will do good
I’m afraid the best advice isn’t easy to hear and is even harder to do. To start, pay your bills on time. Payment history makes up more than a third of your FICO score. This is the best way to start your credit numbers on their way up.

Then …

  • >Pay down debt. For recurring bills, try to use auto-pay (just make sure you have the cash to cover them). Next, attack the high-interest stuff – and Do It, Do It, Do It--pay more than just the monthly minimum on credit cards. That minimum is a revolving credit trap.
  • >Remember all those problems that can hurt your score? Address them. Whittling use of all your credit limits improves your credit utilization ratio, which is how much credit you have versus how much you use. And stop applying for new credit for a while – these applications create what are called hard inquiries, and too many of them hurts your score.
  • >When you get the balance to ZERO, keep the account open. It is now a good account (think paying off: refinances and loans).
  • >If you’ve got scads of people hounding you for money you owe, try a debt consolidation loan. You might get lower interest rates and easier monthly payments – but you’ll have to qualify and stick to the terms.
  • >You may also be able to get a balance-transfer card with a low (even zero) interest rate. If you do get one of these cards, do not keep charging on the original card.
  • >Look into a good credit-counseling agency. Look for a non-profit one with free initial consultations. Try the National Foundation for Credit Counseling.
  • >And this can be huge: Doublecheck your credit report.

Mistakes do happen

Believe it or not, credit bureaus are only human. Something in your report might actually be wrong. Fix that fast.

You can request a free copy of your credit report from each of the three bureaus once every 12 months at AnnualCreditReport.com, and right now the big three continue to offer free online weekly reports. Experian will give you your FICO score for free, too.

Looking over your report, watch for mistakes in the “derogatory marks” in your history (funny thing how if there are mistakes, they’re usually not in your favor…). You’ll see some of those “dings” we talked about earlier.

If you see something wrong, file a dispute with the bureau. Just know going in that they’ll only remove facts that are plainly inaccurate or old.

The good news is that you don’t have to live with a bad credit history.

BE THE ROAR not the echo®

Janet Behm



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