Understanding Credit: 5 Dos and Donts to Getting a Better Score
By Sean Smith
The reason many people have a mediocreor even lousycredit score is simply because most people
have little idea about what actions cause scores to go up or down. The various companies with which you
have accounts report to the bureaus (TransUnion, Experian, and Equifax every !" days. #f course the
bureaus want to see that you pay your bills on time, but they also want to see that there is a wide variety
of credit available to you. The credit scale runs from !"" to $%". &nything over '"" is decent. (ost
people hover between )%" and *%". Everyone is allowed one free credit report annually from each of the
credit bureaus, and +atie ,oss, Education (anager at &merican -onsumer -redit -ounseling, suggests
pulling your credit at least biannually to avoid surprises.
.This way you can see who is reporting on you, learn what they/re reporting about, and ta0e care of it,1
says ,oss. Use this lin02 [Link].com3cra3index.4sp.
Do use credit cards
&voiding the use of credit cards altogether does nothing for your credit score. ,etail credit cards5ears,
6owes, 7- 8ennydo serve a purpose, but your history with ma4or credit cards issued from credit card
companies and ban0s are given more weight. Using them and paying them on time shows fiscal
responsibility. 9owever, try to avoid using over !" percent of the credit at your disposal as this will give
you a negative debt:to:income ratio. Using over !" percent shows .that you are spending more than you
have,1 says ,oss.
9aving multiple credit cards with low balances demonstrates that there is a variety of credit available to
you that you appear to not even need, and that improves your score. This is where retail cards can help. ;f
you are a shopaholic that doesn/t trust yourself with such a card, get a gas card. <on/t apply for credit you
don/t need. Every time you apply, an inquiry brings your score down temporarily. 9aving several cards
with low credit limits does not improve your credit score.
Dont skip a payment or be late
;f you are over !" days late paying your bill, it goes on your credit report. ;f another !" days goes by
without payment, your credit score is dinged again. These late notifications stay on your report for seven
years. 6ate fees for a missed payment are usually over =!"."". >hen you/re ill or need professional
medical care, you can rac0 up serious debt rather quic0lyeven if you do have insurance. This 0ind of
debt is not necessarily reflected in your credit score unless you refuse to pay it.
.<octors often do not ta0e the time to report these debts because the process and the paperwor0 are time:
consuming,1 explains ,oss.
(a0e arrangements with the doctor or hospital. 5ometimes a payment as low as ten dollars a month is
acceptable. ;f you avoid collections, you/re score will most li0ely remain unaffected.
Dont close a credit card
-losing a card brings down your credit score. The bureaus assess you by the length of time your credit
line has been available to you.
Dont file bankruptcy if you can avoid it
;f you are significantly overwhelmed with debt, it is only natural to consider the one move that would
wipe much of that debt away. &void it if you can because not everything goes away, and your credit score
will be shredded. & ban0ruptcy filing will haunt you for a decade, and it is truly a last:resort option. Even
if you file for ban0ruptcy and then change your mind and rescind the filing, the initial filing will remain
on your credit history. 5tudent loans, taxes and alimony are 4ust some of the debts that ban0ruptcy does
not discharge.
Do take out an installment Loan
;nstallment 6oans are another avenue for demonstrating you have an array of credit options that you can
adeptly manage. ;t is more than li0ely that you have at least one. ?ou probably have a car loan, and you
may very well have a mortgage. @oth those payments should be on automatic draft from your account. ;f
you have only one installment loan, or if you don/t have one at all, here is an option2 ta0e out a personal
loan for something you absolutely need, li0e car insurance. (ost insurance companies give a discount to
those who pay the entire year/s premium all at once. Then simply ma0e the monthly payments on the
loan. ,oss further advises doing your own research in regard to interest rates before you actually have a
ban0 loo0 into your credit. Each formal inquiry about your scoreor .hard pull1is recorded and
announces to the bureaus that you are loo0ing to borrow money and thus increase your debt.
*This article was published by the Halogen TV website