Establishing good credit is essential in today’s consumer environment. It is most critical when considering the purchase of a home and acquiring a mortgage.
5 Key Steps to Managing Your Credit
- Make your payments on time!
o A late payment affects your credit quickly!
- · Don’t max out your credit card – try to keep the balance at 50% or less.
o Its best to have a few cards at a half balance than 1 card maxed out
§ This rule is particularly true when you are shopping for a home loan
- · Don’t close ANY OLD credit cards!
o You will loose your “start” date and never get it back. The longer you have a card open the better it is for your credit score.
- · Do NOT open Store credit cards (i.e. A department store or music store)
o However, if you already have some open – DO NOT CLOSE THEM EITHER – just keep them active and paid on time!
- · Keep your credit open & active. For the cards you do have – use them every 3 months – allow them to send you a statement and then pay if off!
o It does you no good to use it and then pay it off online when you get home – you need the credit company to report the use to the bureaus and this happens every 30 days (when you get your statement).
- · Check your credit report every 3 to 6 months to prevent identity theft.
o Try http://www.annualcreditreport.com
- · Do not pay for your credit score – too many inquires done yourself will bring your score down!
Key Steps to Repairing Your Credit
Much like managing your credit well – repairing your credit requires the same rules. If you are shopping for a home loan and your score is too low here are some key steps to heal your credit.
- · Start making ALL your payments ON TIME no matter what!
o Your credit score can heal itself every 30 days
- · Start to consolidate your debt by paying off the high interest cards first while maintaining monthly payments on the other cards.
- · DO NOT OPEN any new lines of credit at all.
o When shopping for a home loan you could ruin your credit score and debt to income ratio with too many lines of credit.
- · DO NOT use a “credit repair” company