You Are Your Credit Scores
Take Good Care Of Your Credit Scores…
And They Will Take Good Care Of You
You probably know that your credit score represents you in the financial world; but do you know how it can change your life?
Well, your credit scores reveal to creditors what kind of risk you will be, which in turn determines what kind of rates you will be paying. So if money is no object and you have plenty of it, then ignore your credit scores. However if you are like most of us, money is tight so saving money on fees and interest rate charges is a big deal.
The Down & Dirty Of Credit Scores
When you apply for a car loan, student loan or mortgage your credit scores are checked. Lenders want to check for loan defaults. When you apply for a credit card, your credit scores are scrutinized. The credit card company wants to see if you have a history of late payments, delinquencies or bankruptcies. Individuals with a messy credit history get low credit scores which tell creditors and lenders that you are too risky to do business with. And they only way that they will work with you is by overcharging you for their services with high fees and interest rates. When you apply for a job, even employers check out your credit scores. Employers want to know if the people they are hiring are reliable and responsible, they use credit scores to determine that.
Keep in mind that it’s not just lenders, creditors or employers that use your credit scores to evaluate your creditworthiness. Utility companies, insurance agents and landlords also use them to evaluate you, financially speaking. So that little 3 digit number called your credit score is very, very important if you drive a car, rent, want to buy a house, use credit cards, want a job, or use electricity. Credit card companies report to the 3 credit bureaus every month, that’s how important your credit score is to them. Is that how important it is to you?
Do not be alarmed but be aware. If you simply miss one payment on a loan or make one late pay on a credit card it will be noticed and you will pay. It’s not fair, but it is the way the credit system is set up.
Late Payer, Non-Payer
The way creditors see it, once a late payer, always a late payer. So they brand you and once they do that, it is very hard to change it and it gets very expensive with late fees and high interest rates. Always, always make a payment. Do whatever you can to avoid missing your payments. Even if you have to make a smaller payment at least make a payment. If your payment goes past being 90 days late, your credit score will plunge and could stay there. The financial industry believes that once someone is over 90 days late in making a payment are more likely to walk away from that debt, so be careful on the timing of your payments.
Repeat late pays can be another action that is viewed as damaging. If you are continually a late payer, your score can be damaged as much as a bankruptcy or collection. Late pays are take very seriously by creditors. This becomes obvious when you realize that 35% of your credit score is determined by your payment history.
Always maxing out on your credit cards is a bad sign. Creditors and lenders see you as top-heavy. They think that you are financially stretched too thin and have too much debt. Debt is a bad word in the financial industry. So do your best to avoid maxing out your credit card limits. And by all means never, ever max out several credit cards, that’s a very big no-no.
Yes it’s nice to get freebies when you take up offers made by credit card companies to open new lines of credit, but don’t. Having too many credit cards, even if you do not use them, does lower your score. They figure that the more credit cards you have, the more credit you have available to get in trouble with. Why tempt yourself with debt accumulation, limit the number of credit cards you open.
Big Oops Can Cost You
Credit reporting agencies do make mistakes that you end up paying the price for so watch for mistakes. You can get a free credit report from each of the 3 credit reporting agencies, Equifax, Experian and Transunion, once a year, take advantage of that. It’s a way for you to keep tabs on the information they collect and report about you.
Help Can Be Available
If you are having a difficult time financially ask your creditors to give you a break by perhaps reducing your minimum payment amounts. Maybe they can work out some type of schedule with you. Remember that credit card companies and lenders do want their money so they may be more willing to work with you than you think. You won’t know until you ask, so do not be afraid to ask for help if you need it.