Feb 12, 2013: A lot has been written about credit rating and how we can go about improving it. There are companies offering professional services to help us earn better credit scores. But with a little contemplation we'll see that we don't need to spend our hard earned dollars on professional help for building a strong credit rating. It's simple, DIY (Do It Yourself) and boils down to the following four steps:
1. Paying our bills on time
Apart from extreme circumstances like bankruptcy or tax liens, nothing has the impact of late payments. More so if we're late on our mortgage or rent payments. Anything more than 30 days late will hurt us. We should be careful to not let a payment of any kind (including utilities) get 90 days past due.
2. Limiting our debt
It's best not to carry any balance on any of our card accounts. We can make it a goal to pay off our credit card bills in full at the end of each billing cycle. But if we absolutely must carry a balance on any of our accounts, we should try to keep that balance as low as possible. If we bump against our credit limit on one or more cards it's a sure shot signal to many lenders that we're not good debt managers.
3. Monitoring our credit reports
This is especially important to prevent identity thefts, keep an eye for any errors in our reports and monitor our progress. We should also check our credit history when we are planning to apply for a time-dependent loan, say a mortgage. The Federal Law entitles us to one FREE annual credit report from Experian, Equifax and Transunion via annualcreditreport.com. Usually it's a good idea to check our credit report twice a year. After we use up our free annual report, we can purchase an Equifax 3 in 1 Credit Report which contains line by line comparison of our credit history with Equifax, TransUnion and Experian.
4. Not applying for too much credit in a short span of time
Multiple requests for our credit history (say within a span of 90 days) is bound to reduce our credit score. This excludes requests by us to check our credit files. We should be extra careful when we are searching for good rates on loans. Its fair to assume that every time we give our Social Security number to a lender, they will order a credit history.
If we execute the above mentioned steps in a disciplined and consistent manner we should be well on our way to a strong credit rating. No professionals or complicated theories are needed.
We welcome you to share additional tips for building a strong credit rating. Meanwhile all the best on your journey to a strong credit score :).
1. Paying our bills on time
Apart from extreme circumstances like bankruptcy or tax liens, nothing has the impact of late payments. More so if we're late on our mortgage or rent payments. Anything more than 30 days late will hurt us. We should be careful to not let a payment of any kind (including utilities) get 90 days past due.
2. Limiting our debt
It's best not to carry any balance on any of our card accounts. We can make it a goal to pay off our credit card bills in full at the end of each billing cycle. But if we absolutely must carry a balance on any of our accounts, we should try to keep that balance as low as possible. If we bump against our credit limit on one or more cards it's a sure shot signal to many lenders that we're not good debt managers.
3. Monitoring our credit reports
This is especially important to prevent identity thefts, keep an eye for any errors in our reports and monitor our progress. We should also check our credit history when we are planning to apply for a time-dependent loan, say a mortgage. The Federal Law entitles us to one FREE annual credit report from Experian, Equifax and Transunion via annualcreditreport.com. Usually it's a good idea to check our credit report twice a year. After we use up our free annual report, we can purchase an Equifax 3 in 1 Credit Report which contains line by line comparison of our credit history with Equifax, TransUnion and Experian.
4. Not applying for too much credit in a short span of time
Multiple requests for our credit history (say within a span of 90 days) is bound to reduce our credit score. This excludes requests by us to check our credit files. We should be extra careful when we are searching for good rates on loans. Its fair to assume that every time we give our Social Security number to a lender, they will order a credit history.
If we execute the above mentioned steps in a disciplined and consistent manner we should be well on our way to a strong credit rating. No professionals or complicated theories are needed.
We welcome you to share additional tips for building a strong credit rating. Meanwhile all the best on your journey to a strong credit score :).
