A new year is a great impetus for doing something good for yourself. We’re not talking about the cliche gym membership or unrealistic diet plan, Queen of PAWNS suggests taking a little time to give your finances a look over and make-over. Sometimes, lack-luster credit can affect things as simple as renting a home or getting a new job. Here’s some tips to tackle this project, one step at a time.
FIRST - Get your free credit report.
There are a couple things to be aware of when getting your free report.
- The FTC website is the only reliable online source. To get a free credit report online, the only recommended site is annualcreditreport.com, which is maintained by the FTC. Other websites with similar names are not to be trusted. If you prefer, you can also get a free credit report by calling 1-877-322-8228.
- Never give a credit card number for a free credit report. If an organization is requesting a credit card number for whatever reason, they are not to be trusted. A FICO score is different from a credit report and you will need to pay for that.
- All credit reporting bureaus (Equifax, Experian and TransUnion) offer one free credit report per year. We suggest you spread these requests out over 12 months. Go to annualcreditreport.com and request one report from, for example Equifax. Four months later, get another report on the same site from Experian and four months after that, request a third report from TransUnion.
Before going any further, scour your reports and dispute any information that is inaccurate, giving special attention to late payments and collections.
Acquiring your credit reports is also an important step in protecting yourself from identity theft. This is a topic we discussed in a previous post, Let’s Talk About Identity Theft.
Now, time to CLEAN UP.
Keep Credit Card and Loan Balances Low.
Your debt to credit limit ratio - which is the amount you owe as a percentage of your outstanding limit - accounts for 30% of your credit score. To put it simply, don’t run up a big balance. If you have nearly met your credit limit, call your card company and ask for your limit to be raised. If you qualify for a larger limit, it will decrease your credit limit ratio, thus improving credit score. Be careful not to use that extra credit though. Ideally, use no more than 25% of a credit card’s limit.
Pay On Time.
35 percent of your credit score is based upon your timeliness for paying ALL your bills. Not just credit cards. So pay on time, even if it is only the minimum.
Older Is Better.
If you must charge, use an old card. 15 percent of your score is determined by how long you have had an account. The older your history the better, as it builds a lender’s confidence about your financial habits. Don’t cancel unused cards - this wipes their history from your record. Just put them in a safe place and keep track of all your accounts.
Keep a Healthy Mix.
Yes, older credit cards are important to keep open. At the same time, keep open credit lines or loans to a minimum. Managing a wide range or mix of credit account types wisely - from credit cards to installment loans (such as auto loans, personal loans and mortgages) shows responsibility. It can also shift a FICO score up a bump. Your mix of credit cards, retail cards and installment loans account for 10 percent of your score.
If You Must Apply, Do So Strategically.
10 percent of your credit score is determined by your pattern of applying for new accounts. It doesn’t bode well in the eyes of potential lenders when you apply for a lot of credit - to them, it looks like you could drown yourself in debt. Be strategic in your reason for acquiring new credit. When applying for car, home or business loans, keep all applications within a two week period. This strategy will bundle all those applications together and count as only one request on your record.
Stay In Touch.
Communicate with your credit card companies, lenders and other debtors. If a bill cannot be paid on time or you have run into unusual circumstances such as illness or natural disaster or you simply want to see if there is an option for lowering your payments, call your companies, you may be pleasantly surprised. Also, if you have been a good customer, don’t be afraid to ask about protocol to request a goodwill adjustment. This could result in the mark of a late payment being removed or something of the like.
At Queen of PAWNS, we care about our customers. As a pawn shop, we are here to be of financial assistance when we can. In addition to offering solutions for fast money or shopping for affordable luxury items, it is our hope that discussion topics such as how to keep your credit tidy will be useful in helping you keep your financial life a little more optimistic.
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