Credit is a big deal. Being known as a financially responsible person is a key component to your ability to make purchases on credit and to get the best available interest rates on them. Forget the days when everybody knew everybody and all that. When it comes to credit, you are a number and you must make sure it’s a good number.
There is a lot that goes into your credit score, and many people know a lot about those factors. But sneaky things can hurt you, so you must also know how to watch for and avoid those problems.
Find And Fix Mistakes
It’s bad enough to screw up your credit with your own bad choices, but it’s worse when something incorrect shows up on the report. How do you know this happens? Many times, you don’t. Something gives you a hit on your score, but because you don’t apply for new credit anywhere for a year or two, you never realize the blow to your financial reputation.
This can happen easier than you might think. One true example is a college freshman who traveled with his parents on a cross-country trip. Their first night at the destination saw him in the emergency room with food poisoning. Because of his student status, he was on his parents’ health insurance, but it was slow paying the claim because the hospital was out of network. They ultimately covered the entire cost, but by then the debt had gone into collection and the hospital neglected to tell the collection agency that the balance was settled. The student took a hit on a credit score that he barely even had Two years later he was denied his first cell phone because of his bad credit. He investigated through a series of phone calls and letters, and eventually his credit was restored.
This family handled it the do-it-yourself way but, given the rise in identity thefts, there’s a whole world of experts out there to help you fix these errors and omissions in a timely, efficient manner.
Stay Put—At Least For Creditors
We all have transitional times in life where we move a lot. We graduate high school, maybe go through several addresses during college, and then get a job and work our way through a few other residences before finally buying a home where we stay for several years. It’s just how life is. However, constant changes of address and phone number are bad for your credit because it looks like you’re trying to elude creditors.
What to do? Get a constant address and phone number. With nationwide wireless calling, you can make a cross-country move and still not be a long-distance call from your old number. And as for your address, for as long as you stay in the same general area you can get a post office box. They’re cheap and safe, and you can move many times without ever changing your address.
Watch That Score!
The ailing vacationer above never knew anything was wrong for a number of years. He lived off his scholarships and his summer job money, never applying for a credit card or vehicle loan. When senior year came and he wanted a cell phone for potential employers to reach him, he found the problem.
Don’t let that be you. Get a free credit score periodically to make sure that you aren’t getting wrecked by somebody else’s mistakes, and use it as an accountability tool for your own spending and credit habits.
Be Prompt In Paying
You know what’s a simple way to help your credit score? Paying your bills on time. Technology makes it easy, yet people still manage to screw up and end up late on bills they have the money to pay! We are years past worrying about which day to mail a bill so that it’s not late to the creditor or early to our checking account. With online bill payment available for literally almost anything, we can be properly credited for the bill on the exact day when it’s due, without gambling that our mail carrier doesn’t have a lead foot.
So pay on time! Just as soon as you receive the bill, set it for automatic payment a day or two before the due date. And if cash is still a little tight as due dates approach, use a credit card as a bridge. Pay the bill with plastic, then as soon as your cash allows, pay it off of the credit card.
Paper or Plastic? Paper Is Better!
Which brings us to another point of prevention: Don’t rack up the plastic. Certainly it’s handy in certain circumstances, and in others it’s a must. For example, it’s not advisable to use a debit card for online shopping or telephone transactions, because any hacks that take place will involve a theft of cash from you as opposed to an unauthorized expenditure on a credit card. Obviously it’s preferable to let the latter one float until the fraud protection kicks in, compared to the former.
And there are times when credit cards can save you considerable money and hassle. Many stores offer discounts for opening or using their store charges. Nothing wrong with that…if you pay it off immediately and avoid interest. It’s also nice to use store charges on items you may return. With growing kids, you may need to buy items in a number of different sizes and have the wrestling match/fit check at home, then return the unneeded sizes later. As long as you make those “reverse shopping” transactions before interest accrues, it’s preferable to using cash for a bunch of likely returns.
But borrowing money via plastic simply because you lack the cash is a darn fine way to build a snowball that will crush you in debt. Credit bureaus are watching the flakes accumulate, and when they start to see mounting balances and minimum payments, they’ll begin to ding your score. Swipe carefully!