Tuesday, March 6, 2018

How to Maintain a Good Credit Score & Find Financial Freedom

If you are looking for a home mortgage, then you need to know your credit score. You can order a free report from each of the major reporting agencies once a year. Maintaining a good score or raising it a few points can often help you get a better rate on your mortgage. Here are some tips to help you maintain a good credit score.

Understand the Components of Your Score

The biggest component of your credit score is your payment history, so try to not have any delinquencies, declare bankruptcy or have other problems appear on your Fair, Isaac and Company (FICO) score

It is often recommended that you keep your balances on all your accounts like credit cards and installment loans under 30 percent. Try not to open any new accounts and have some type of activity on all accounts over a year old.

Think before letting someone run your credit as you do not want more than four credit checks in any three month period. Try to maintain between one and three revolving credit accounts but avoid having more than seven.

By maintaining a good credit score, your financial freedom will improve. You’ll have more access to opportunities, such as being able to apply for a home loan with certain banks. In that case, you’d be able to get the resources you need to get the home that would be best for you and your family.

Spot Mistakes

About 20 percent of people have a mistake on their credit report that makes them look riskier than they are, so it is important to get these mistakes corrected. Send a letter to each of the major credit agencies and include any documentation that you have supporting your claim that they made a mistake.

Also, send a letter to the company that made the mistake insisting that the error is corrected. If they continue to report the information that you think is in error, they must tell the reporting agency. They must also take steps to correct the problem if an error occurred.

Build Your Credit Utilization Ratio

Your credit utilization ratio is vital to getting a good credit score. It is determined by the amount that you owe on all credit cards compared to the amount that you are allowed to borrow on each card. Assume that you have three credit cards with a total borrowing limit of $6,500, and you owe $2000 on one of them. Your credit utilization ratio is 30 percent. 

If you close one of your cards, then you may only have a total borrowing limit of $3,500 and your credit utilization ratio rises to 57 percent. Strive to keep your credit utilization ratio below 30 percent.

Avoid Having a Hard Pull Done on Your Credit

There are two types of credit reports that can be done. If you are looking for a new job and the company decides to run a credit check, this is a soft pull. A soft pull also happens when you get an unsolicited credit card offer in the mail. 

Alternatively, hard pulls require your consent. If you must have a hard pull done, then try to group all your hard pulls together as all inquiries within 45 days are considered one hard pull. Letting someone run your credit can hurt your score by up to 20 points.

Use these steps to make sure that your credit stays in great shape. You also need to remember to pay your bills on time so that you do not receive any bad reports on your credit score.

1 comment:

  1. Helpful advise! Thanks. If someone wants to maintain a good credit score then it needs dedication, sacrifice, total commitment, and living on a budget.


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