In a world where good credit seems to be more and more vital, every tip and piece of knowledge you can muster can be huge to your financial health. I read the other day that only 8% of the entire wealth of the world is ever printed as physical cash. The rest seems to exist on a computer hard drive, in electronic bank accounts around the world. That leaves 92% of the wealth existing in some sort of credit. Without good credit, you don't have access to this wealth and it could hinder your ability to prosper and make finances one less worry in the life of you or your family. Unless you have cash hand over fist at your disposal, the chances of you needing credit loom rather large. If you do have cash hand over fist though, we should probably talk:)
Here's a few steps you can take to improve your credit and this can be done all by your lonesome:
- Pay off existing credit cards and lines of credit- Okay, this one is a discipline type of thingy. Unless they are absolute essentials (and no, a trip to Atlantic City is NOT an essential) ... don't spend a dime on anything other than paying down/off debt. It has been shown that credit cards with at least 90% of credit card debt paid may show an increase of 70 points on your score (assuming there are no additional negative items).
- Use Credit like you would use Dashi stock in Japanese Cooking, sparingly- Unless it's an emergency, keep those credit cards nice and snug in that dapper little wallet you got for Christmas last year. As your debt to available credit ratio improves, so will that very important credit score of yours. Of note, the score itself has become more and more important these days in lending. So, you want to make sure your FICO Score is as high as possible.
- If you are going to pay off an account, Do Not Close It - And I verified this one with our Credit Guy, it seems the scoring module works like this. Closed accounts with balances will throw off the debt to available credit ratio. When you close accounts, it generally lowers your score... at least initially.
- Repeal the temptation of applying for New Credit - The module tends to think that applying for new credit may mean you are becoming 'credit desperate' and your score can go down 10-20 points depending upon how many outstanding credit cards or loans you have. So while you are paying down your debt, apply for no other credit whatsoever.
- Ensure all positive accounts are reporting on all three credit bureaus - Review your credit report in full, making sure every loan (car, student, etc) and revolving line of credit (credit cards, store cards, etc) are reporting to all three bureaus. If you are paying those accounts on time, you will want to make sure all three bureaus are recognizing your stellar spending habits.
- While you are reviewing your credit report, watch for mistakes - Maybe your twin brother Pedro has a collection or late payment showing on your credit file? Maybe your cousin Eddie has a bankruptcy that has somehow found itself on your report? These kind of mistakes can be brutal, make sure they aren't showing up on your beloved resource for helping to achieve wealth.
- Apply for a Secured Credit Card - If you have no credit at all or all of your previous accounts have been closed, you'll need open credit on your file to maintain a credit score. Apply for a secured credit card and after six months, ask for an increase in the credit limit. Secured Credit Cards are usually cards where you give them cash up front and they then give you a credit card to borrow from it. Just make sure that card reports to all three bureaus.
These quick tips are some of the things that can help to improve your credit score. As a consumer, you probably already know that your credit score plays a significant role in your financial well being. As I've written before, it can get you dinner at the White House or Ramen Noodles in the poor house. Well, it may not get you Foie gras with the Commander in Chief, but it well help you avoid chowing on Spam with your Cousin Eddie.
I am fascinated by this fact! " that only 8% of the entire wealth of the world is ever printed as physical cash."
Can we invent our own currency sweetie? I'd love to see you in Armani :)
Just when I thought you had lost it, you come up with something really great! This is valuable and accurate advice.
Hi Jen :-)
Jennifer - I was fascinated by that as well. Inventing our own currency? Hmmm, I'll get back to you on that;-)
Beth - I lost it a long time ago, doesn't mean us crazy folks aren't pretty darn smart.
Jason, I can't believe that Beth would have thought you lost it. I know Jen wants you, in or out of Armani. That said, great information. We should start a service helping people understand what they can do to help and protect themselves.
We have a guy out of Denver who comes and does "credit seminars" for our Realtors. He's with Advantage Credit. If you have access, it's a great tool for your realtors (and us as LO's). Especially with risk based pricing. He said to maintain 3 open credit cards with 30% balance. If you have 1 late payment, it can affect your score by as much as 70-100 points. He's got a "what if" simulator on the site too which has been extremely helpful.
Hi Beth :-)
@ Fred... True... he does look best OUT of it!
Fred - Yes we should. We'll talk again soon.
Amy - Sounds like a great service! I believe the more education that's thrown around regarding credit, the more everyone will benefit... even the (I dare say) creditors?
Jennifer - Easy senorita, my Mother reads these:-)
Hi Mom :)
Great post, Jason.
So obviously you and Jennifer spend your days blogging back and forth on opposite coasts.
Newlyweds. (sort of).
Jason... I have noticed banks seem to be looking to close dormant credit card accounts. My credit score is quite high but in the last month two banks have sent me a letter saying my account would be closed if not used in the next 30-60 days. Gotta remember to use the cards at least once a year.
Hi Mrs. Sardipants
Hi Beth
Jason, Excellent advice! Hope more read this and take it to heart.
Good advice for consumers. Great post. I hope buyers read it. Good luck.
Great practical steps to keep that credit rating high Jason. Reviewing the credit report and cleaning up the mistakes can make a big difference too.
Jason,
Great advice that everyone can use....and written in a very straightforward way that even the layman/woman can understand!
Jo
Erica - Thanks! As far as Jennifer & I... in due time.
Dan - What an interesting time we live in as far as the ENTIRE credit industry goes. Having a handle on your credit has maybe never been so important. Going forward, we must educate ourselves to better serve our financial lives.
Marc - Thanks man. I've been reading all I can get my hands on in regards to credit. I'm a sponge I tell you, a sponge!
Gita - Feel free to lead any prospects you have to this post. Thank you.
Gary - That it can.
Jo-Anne - Grazie. Even I can be straightforward and simplistic now and again:-)
Great tips ! I think the first goal for everyone is to just pay off and pay down those balances ! That is the easiest (most of the time) and it is a two part benefit - have less debt and a higher credit score as a result !
Hi Dan :-)
Hi Jason, You always have the best advice. I was just talking to the hubby about closing a couple of our credit cards and I said that we should keep them open with no balances. Now Dan said something I thought was interesting, that the credit card company will close the account if it is not used? Bastards!
Jason- This is very good information in times when we need to tighten our credit spending. Never buy disposables with credit, groceries, toiletrees, stuff that you are just using up and use only in emergencies or in a plan to build credit.
Hi Dano :)
Jason, great tips for the consumer and Realtors also. I never understood the part about paying off a card and closing it will hurt your score, but I had heard that before. Thanks for the tips.
These are all fantastic tips to help people with their credit, keep up the great work Sardi. I'm also with Mike, I never realized that closing a card was a bad thing. Of course, I have never used a credit card.
Fred and I hate the fact that so many people are paying thousands and thousands of dollars to get "credit repair" when they don' t have to! Thanks for the information - need more of it out there!
Jason, brilliant again. If your mom is reading these, she must have a sense of humor. Maybe we could print currency with some of your wrestling photos on them. Hmmmm, this could be fun.
Christopher and Stephanie - That's the goal, for sure. Sometimes easier said than done.
Beth - No flirting on my posts!
Audrey - The times are a changing. I hope some of these tips will help you and any of your prospective clients.
Katerina - If we don't tighten our credit spending, they will do it for us. And collection calls are rarely fun...
Jennifer - Review my comment to Beth:)
Mike - Some of how it works doesn't seem to make the most sense in the world. Understanding the system will help those utilize that much better.
JL - If you have never used a credit card, you are in the minority. Keep up that great work!
Eleanor - There are only a few reputable companies I know of and paying thousands of dollars is just a waste of time and money. Most, if not all, can be done by yourself. There are occassions and situations where folks don't have the time or knowledge to do this, that's when credit repair can come into play. Still, I believe it is muy importante to get this information to the masses.
Greg - Of course my mom has a sense of humor, she married my father. Currency with my wrestling photos? I think not! I don't look too dapper in tights.
Jason, once again you come through with a great post. Information that all can use.
Loved the factoid! who would have guessed. 8% printed -- all the rest is a fantasy! I have never understood why closing a cc acct lowered a credit score -- seems counter-intuitive, but then the whole industry seems that was some times. thanks -- enjoyed it.
Jason,
Keeping our heads and being smart will ensure that we are ready to move forward when the crunch passes.....and not have to start from the bottom....nice post my friend.
Danny - Thanks man, I do what I can.
Alexsandra - It is a peculiar industry, for sure. I wish they would teach more about it in High School and College.
Dan - Well put and I agree. Stay warm over there.