Building Healthy Credit – Day 3

On a scale of 300-850, people with top tier credit scores (760 to 850) have a footprint of financial responsibility, and lenders have a tendency to reward this elite group with lower interest rates.

If you’re not in this category, then take a look at your current scores and see what you can do to kick it up a notch. Set your personal goal and stick to it!

Pay Your Bills on Time

Paying your bills on time is a good habit to have, when it comes to improving your credit scores! If you need help in this area, set up a spreadsheet or even a handwritten monthly checklist, so you can see all your current bills and their due dates.

You can also set reminders in your calendar or cell phone, or make arrangements for automatic payments, to stay on top of it. Do whatever it takes to program yourself into a regular pattern of paying bills on time.

Your credit card payments are generally due on the same day each month. So, if your current due date puts you in a money crunch, call your credit card company and ask them to change your due date, so it doesn’t coincide with other large payments you have to make (such as your rent or car payment). That way, you can regulate your cash flow and avoid relying on credit cards for random spending in between paychecks!

Pay More Than the Minimum Payment

If you only pay the minimum payment on your credit cards, then you’re paying just a little more than the monthly interest fees. Set a realistic goal for yourself. If you can pay double or triple the monthly payment for the next six months, then you’re starting to chip away at that larger balance. But, at the same time, don’t revert back to using the credit cards again to make it through your monthly living expenses.

Here’s a quick guideline to follow:

•    Make sure your balance is below 50% of the spending limit to maintain your current credit scores.
•    Reduce your utilization down to 30% of the total credit line to improve your credit scores.
•    To get in the “800 Club”, use no more than 10% of the allowed spending limit.

When an emergency pops up that absolutely requires you to use a credit card, make an educated decision as to which credit card you should use. Pick the one that won’t vault you over that 50% utilization mark.
Having credit cards helps you establish credit scores. But, using them responsibly helps you attain great credit scores.

Make Regular Payments on Installment Debt

If you’re making payments on a student loan or a car payment, make your regular payments on time.

Do not try to pay it off early! That won’t increase your credit scores. However, if you make the regular payments on time, then you’re proving that you have the ability to fulfill a financial commitment.

Don’t Cut Up Old Credit Cards

If you have a stagnant credit card with a zero balance, make a small purchase and pay it off quickly. Or, use the old card to make automatic payments on a regular monthly expense, such as a utility bill. This doesn’t change your monthly budget, it only changes who you’re paying the money to. This can raise the Credit History portion of your scores, based on how long you’ve had the credit card!

Make Sure Your Credit Reports are Accurate

Last, but definitely not least, go through your credit reports carefully (you should have one each from Experian, Equifax and TransUnion) and look for errors.

•    Make sure the items listed on your card are yours. If you find charges you didn’t make, you may be a victim of identity theft, or someone else’s data is being reported to the wrong file.
•    Make sure “on time” payments are not listed as “late”.
•    Make sure any collections that you’ve paid off have been removed.
•    Make sure all creditors you are faithfully making payments to are being recorded.
•    Look for negative comments that are older than seven years. You can ask to have these removed.
•    Look for bankruptcies older than 10 years, or accounts associated with the bankruptcy that are still showing up. You can ask to have these removed.