Crucial information and tips on managing your financial profile.
One of the most important aspects of managing your credit is learning how to maintain it. This means learning how to maintain your credit report. Your credit report provides information on your current and past debts and how you have handled them. Lenders look at your credit report to determine whether or not you are a good “credit risk”-that is, to determine whether or not they should take a chance loaning money to you. A poor credit report can mean that you will be turned down for loans, or that you will pay a higher rate of interest than someone with a better credit report.
In the United States, three separate credit reporting agencies maintain credit reports on you: TransUnion, Experian, and Equifax.
The first step to maintaining your credit report is knowing what is on it. By federal law, you are entitled to a free copy of your credit report once every twelve months. You can request a free copy of your credit report online at www.annualcreditreport.com.
When you receive your report, read it over carefully. You may find inaccuracies. For instance, an account that you actually paid off may show up as “charged off,” which will lower your credit rating. Other common mistakes include errors in your contact information, listing accounts that you don’t have, and listing balances due on accounts that you have paid off. If you find mistakes, submit corrections immediately. Explain clearly which entry you are challenging and what the error is. If you have any proof, such as a statement showing a zero balance, make a copy of it and send it along with your correspondence.
Besides correcting inaccuracies, what can you do to maintain your credit? One suggestion is to use credit wisely. Don’t charge more than you can afford, and avoid maxing out your credit cards.
Speaking of credit cards, it’s a good idea not to carry more than one or two with manageable credit lines. Even if you pay regularly, a potential for a large amount of unsecured debt may scare off some lenders. Another thing that can make lenders think twice is a history of opening cards, maxing them out, then transferring your balance to another card and closing the first card. Lenders want to see that you can maintain a paying schedule over a long period of time, so a history of opening and closing cards quickly can be a red flag to them.
When you do carry debt, it’s important to make payments on time. Credit card companies and other lenders often report a history of late payments to the credit reporting agencies. Too many late payments make you seem unreliable-a poor credit risk.
In this day and age, most people carry some kind of debt, whether its credit card debt, car loans, student loans, mortgages, etc. Most of us either have made or will make large purchases that require us to go into debt. In order to get the best offers on loans, it’s very important to maintain your credit. Learning how to maintain your credit report can help give you the power to purchase the items you need and want, and a good credit report will give you the leverage you need to get the best deal from lenders…every time.