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How to manage your credit score

Credit-ReportWhen you apply for a mortgage or credit card, your lenders tend to check your credit rating. By doing this, they determine whether you pose any amount of risk to them. A bad credit score can seriously dent your credit prospects in the future. Similarly, a good and well-managed credit report can put you in good light in front of your creditors. Hence, it’s very important for you to maintain a good credit score.

Following are some tips that can help you immensely in managing your credit score:

Make Your monthly Payments on Time:

A payment history is perhaps the most important point you need to consider when it comes to managing a good credit score. Late payments can drive down your credit score considerably. Payments that are due for 30 days or more will show up on your credit report and will have a negative impact on your score. These negative marks can stay on your credit report for as much as 7 years and affect your credit prospects. Hence, it’s essential for you to pay your obligations well before the due date. By doing this, you can not only maintain a good credit report, but also increase your future credit prospects.

Keep Your Total Debt Load Under Control:

The total amount you owe is the second largest factor that can affect your credit score. No lender will lend money to a person who is already in huge debt. It’s very important for you to keep your borrowings under control. If you owe a large amount of debt, your priority should be to stop taking more loans and work towards lowering the existing debt amount.

 Do not close your old accounts:

Many people believe the myth that by closing your old accounts, you can improve your credit score. You need to know that by doing this, you’ll only be hurting your credit score. The length of your credit history is another important factor that credit report bureaus take into account when making a person’s credit report. Closing your old accounts can reduce your credit score as it will make your credit history appear shorter. Hence, if you wish to improve and maintain a good credit score, you need to consider closing new accounts instead.

Be very careful when opening new accounts:

Although new credit is the least important factor in your score, it’s nevertheless an important issue. While shopping for a new credit card or loan, finish your shopping in less time to ensure your credit report doesn’t suggest that you are constantly looking for credit. This may project you in a bad light in front of lenders.

Also, strictly avoid opening new credit accounts that you do not intend to use. It may indeed be tempting to open that new retail store card and get an additional 10% off; however, the little amount you save can be relatively insignificant, as multiple new credit accounts can actually lower your credit score considerably.

Don’t forget to review your current credit report and repair credit report mistakes:

Every person is entitled to check his/her credit report every year from all major credit reporting bureaus – Equifax and TransUnion. Checking your credit score will count as a soft inquiry and so, won’t hurt your credit score. Your credit report can contain incorrect information. You can get a copy of your credit report to verify all the information it contains. Firstly, ensure that all information contained in your credit report is about you and only you and not some other person with a similar name.

If you find something on your credit report that is missing or incorrect, you need to immediately dispute the mistake by contacting the credit bureaus. Each of the three major credit bureaus has their own dispute procedures on their respective web sites.

Do not ignore your overdue bills:

If, due to some reasons, you are unable to pay the monthly installment on time, it’s recommended that you call your creditors and negotiate with them. If you honestly explain your problems, they may provide you some alternate payment option. This will prevent your credit report from being damaged.

Now that you are aware of these tips, ensure you manage your credit score effectively. Today, a credit score has indeed become a very significant factor and overlooking it can have a detrimental effect on your financial health. To effectively manage your credit score, it is important for you to be aware of the procedure through which your credit score is calculated.

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PS: Using Prepaid Credit Cards DO NOT HELP YOUR CREDIT AS IT IS NOT GUARANTEED THEY WILL REPORT TO CREDIT BUREAUS. Send us an email henri@mortgage-clinic.com and we will provide application forms for a Secured Credit Card who guarantees they report to Credit Bureaus if you use them.

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About Henri Simoneau

Henri Simoneau

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