As a typical consumer you’ve probably already learned the importance of establishing good credit with your lenders. Whether you are shopping for a new home, new car, or searching for the best deals on insurance for either of those purchases, your credit worthiness will be judged by your credit score.
A bad credit history will place literal “black marks” on your credit profile. These marks include things such as late payments, accounts going into collections, and of course bankruptcy.
Establishing positive credit habits and a good credit score will improve your credit worthiness in the eyes of all lenders. This will be noticeable when new, potential lenders, offer you lower interest rates and larger credit lines on new credit card offers.
Here are my 4 tips to help you create, and keep, a positive credit profile:
1) Pay Your Bills On Time Every Month
Most lenders only have your past payment history on file when deciding the type of credit risk you present to their company. How you pay your debts currently is the best indicator of how you will pay off your debt in the future.
2) Don’t Use Too Many Credit Cards
How much is too many? Most credit experts and financial planners suggest two to four credit cards is just about right for most people. According to Forbes, there may be a case for using more or less than that number however.
3) Always Pay At Least The Minimum Due
Always pay at least the minimum due payment, never less than that. And remember, just paying the minimum payment means you will pay interest (and a lot of it).
For example, paying off a $2,000 credit card bill at 18% APR with a minimum monthly payment of 2% ($40 dollars or less) will take you 30 years to pay off the original amount plus interest.
4) Review Your Credit Reports Regularly
Monitor your credit report from all three major credit bureaus - Experian, TransUnion, and Equifax - on a regular basis. Check your credit profile at least once per year. Review each account carefully and make sure that any past mistakes or disputes are corrected.
Also, if you ever notice an account listed on your report that you know you have not personally opened, contact that creditor and the credit bureaus immediately. This could be a sign that you’ve had your identity stolen. Request to have a fraud alert placed on your profile and account immediately in order to protect yourself and your good credit. Identity theft is the fastest growing consumer crime in the United States, with an estimated 1 million people becoming victims each year.
Establish these good credit habits early in your life and reap the financial benefits that your good credit will provide you for the rest of your financial future.