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How to stay on top of your credit score
The Importance of your Credit
Your credit score can impact your life in more ways then you may realize. It basically tells people the story of how you deal with money. Banks, employers and businesses view your report to determine if your a person they can trust. The higher your score and depending on the types of remarks on your account says a lot about a person.
Employers, especially when dealing with money, view your report for a couple of reasons. One being your work history is listed on your report and helps validate the work history that is submitted with your application. Another reason can be to verify residency and that you might not be a short term employee who moves around frequently. However the important reason is employers check your credit history to see if you have amounted a large sum of debt. People with a high debt to income ratio are more apt to steal money from the company to cover there expenses, and show that they are unable to deal with money in a frugal way. This type of person in a position handling money are more likely to use it in ways counter to the companies intent. Now I'm not trying to stereotype people with bad credit but a employer would view you as a risk. Hence the reason good credit can help secure better jobs.
Businesses in many instances check your credit report as well. In cases such as this the business is extending you a service such as electricity, phone, cable over a period of time. In a sense they are giving you a loan of goods that you promise to pay back. As with any type of loan the business wants to make sure you have the ability to pay back the loan. Generally businesses are more lenient on your score and are usually more then willing to provide the service. However to counter for lower scores or bad credit history they will still provide the service but require a activation fee or security deposit. At times these may be steep fees but they have to make sure they are covered if you fail to pay. If you are required to pay a security deposit for a service it is either refunded to you after the term is up or applied to your current bill after a specified time. Therefore you don't actually loose out on these fee's if you prove to the provider that you are trustworthy.
Lastly, Banks check your credit score and here is where it hurts the most. Every single detail of your credit report is scrutinized by financial institutions when you apply for loans or accounts. The reason for this is they are not just providing you a service like cable, phone, internet that they can turn off with a click of a button at the office if your late. They are considering handing you a potential large sum of money be it for a personal loan, mortgage or car. If you fail to pay them back they have to take more steps securing their money back. They want to make sure that before you get one red cent from them that you have the ability to pay it back, and a proven track history of paying back debts. This can be determined in part by a quick glance at your credit score most lenders require a minimum of 620-650 to even be considered for loans. Now you might think "Hey I fall in that 620-650 range I qualify." Well here's the catch this is the minimum, if you take offers while in this range your looking to substantially pay more in interest and fee's. Banks will recognize you have the potential to handle the loan but because your on the low end your still viewed as a risk. Therefore to compensate they charge higher interest rates which the interest is paid mostly during the first half of the loan. However if you do have the ability to pay and are motivated in proceeding with the purchase, making on time payments even at the higher interest rate shows the lender that you are trustworthy and can help your credit score improve, after a period of time refinancing the loan at a lower rate can be an option.
How to Stay on top of your Credit Score
There are many different ways to keep a good credit score. Every 12 months you are allowed to request a free full copy of your report from the three reporting agencies (Experian, TransUnion, Equifax). This can all be obtained from www.annualcreditreport.com this is a trustworthy website that can help check all three at once. The reason to check all three is that some companies may only report to one or two agencies so to insure that your report is completely accurate it is best to view all three. When viewing your full report check for any inaccuracies, these can greatly hurt a credit score by as much as 50 points or more. Inaccuracies can be duplicate posts of a debt, incorrect amounts or even another family members debt that is listed as yours. Another thing to watch for is if you have any debt that has defaulted it is removed after 7-10 years depending on type of debt and your state laws. If you feel there are any inaccuracies don't hesitate in contacting the reporting agency to initiate a dispute. At any time you have the option to sign up for a fee to view your full credit report. However there is another option.
www.CreditKarma.com this website is a lifesaver and is free year round. On CreditKarma you are allowed to view a pretty basic pull of your credit health at any time. I personally check mine on a daily basis, they perform a soft hit on your actual report which doesn't impact your score in any negative way. This site is not 100 percent accurate as to your score but gives you a good average of what it should be. I personally had my credit checked for a new car that I got and CreditKarma's average was only 2 points off from what my score actually was through TransUnion. What CreditKarma will do for you though is pull together all active accounts show your total debt, your oldest trade line history and average, number of credit inquires and a basic overall health of your report. They also offer a free calculator that you can input factors into to help determine if it will increase or hurt your score. They also provide a great variety of offers that you may qualify for to help increase your score with user feedback from customers experiences with the offers. Also checking it on a regular basis helps you fight identity theft or fraudulent accounts being posted to your report that you might not be aware of. It's a great tool to have.
Finally the best way to stay on top of your score is by keeping all your current accounts in order. Pay your bills on time, limit the number of inquiries put on your account, and keep your oldest trade line open. Showing that you have had a long time of experience dealing with credit is key. Even if the credit card is from many years ago when you had little to no credit and the interest rate is higher on it just use it sparingly if you use it at all. Another thing to do is to keep your usage between 1-25% this shows you can handle your money well. Also increasing the credit limit or opening a higher limit card can be a good thing, this shows that you can be trusted with more money.
Remember a good credit score can greatly affect you.