Understanding Credit

In our world today, credit has become an ever increasing measure of ones life. In the past, we would be judged by our life's accomplishments and failures, but today the professional world is moving ever so close to complete credit analysis. You cannot even get auto insurance from most insurance companies until your personal credit has been checked, and then the rates you are quoted are adjusted up or down depending, not solely on you driving history, but by how well you have paid your debts. This article will provide you with a few keys to help you continually improve your credit score (commonly called your FICO score). I hope that your improved credit score will help you save hundreds, if not thousands of dollars, by getting you: lower interest rates, cheaper insurance premium, higher paying jobs, etc.

Here are some ideas that you can use to increase your credit score:

1. Revolving credit debt: (credit cards, store credit accounts, etc)
   1. Keep your credit card balances at or below 50% of your available credit line amount. Your credit score will increase as a result, but if you have balances above 50% your scores will fall.
   2. If you use store credit, plan on using less than half of your available limit and your scores will go up
   3. Do not have too many credit cards, or open accounts. You should have some credit, but limit it so your total credit exposure is not too high.
2. Length of credit history:

The longer that you have credit the more positive the effect it has on your credit score. The length of time a bureau can look back on your credit life the better, and if that history is perfect, then your FICO scores will continue to improve. So think twice about closing your seasoned credit cards, they will help you even if you do not use them very much.

1. Judgments/collections
   1. Many times a judgment or collection is inaccurate, or prematurely attached to your credit. These can really hurt your credit. So take this recommendation to heart. Call the creditor that put this on your credit and ask them for a letter, on their letter-head, stating that this judgment or collection was inaccurate. You can then submit this letter to the bureaus (the three most common are: EQUIFAX INFORMATION SVCS LLC, TRANSUNION and EXPERIAN), which are reporting the judgment or collection and they will remove the item from your credit in about 30 days. Resulting in a much higher FICO score.
   2. If it is an accurate judgment or collection, then there are other things that you can do to lesson its effect on your score, but I will be cover that in another article
2. Late Payments
   1. We all know that late payments to mortgage, credit cards, store accounts, etc. can hurt your credit score, so set up a system of reminders to help you remember to pay these debts on time. I have seen too many people who have low credit scores, just because they forgot to make an auto, credit, or mortgage payment. So pay on time.
   2. If you must put off paying a bill, call the company and let them know what is going on and when and how much you plan on paying, many times this simple phone call will stop a negative report on your credit
   3. If it is a choice, I recommend paying your mortgage. A late on your home, can really hurt when it comes time to refinance your current home or purchasing a new one.

Thank you for taking the time to read my article and I hope that these credit tips will help you improve your financial life.