Part 16 (1/2)

Fix Mistakes

Because credit scores are based on credit reports, ative inforood place to talk about so-called ”credit repair,” as you ht have heard advertised There's no way to really repair your credit other than to correct mistakes And you don't need to pay a coative information is free and, in most cases, easy As we talked about, disputeyour reports for free once a year at AnnualCreditReportcoatives on your report, hoping creditors won't respond in the required 30 days If creditors don't respond within 30 days to confiratives will be te your credit score Of course, if a creditor responds after 30 days, the negative oes back onto your report

Creditors and credit bureaus are wise to this strategy, so filing batches of disputes won't necessarily work If you want to use this ethically questionable tactic of disputing any bad mentions on your reports, at least do it yourself rather than paying a credit-repair service

Pay Bills

Paying your bills on time, every ti View due dates on bills as critical, and aim to pay a few days early Reot lost in the mail-you still owe thea hard-line stand in a dispute with a creditor Of course, you shouldn't allow co what you view as an unjust 39 charge by refusing to pay could ding up your credit report for the next seven years Once the black mark is on your report, it could stay there for the full seven years, even if you give up and pay the bill

Sometimes it's better to pick your battles and choose soyou can do for your credit rating is to continually use credit but use very little of your available limit

If you have several credit cards that have a co a co your score That's because you have an 80 percent ”utilization ratio” Calculate your ratio by dividing your coet that ratio down to the 30 percent range To optimize your score, aim for less than 10 percent Remember, you score doesn't care whether you pay off the balance, only how iven ti you don't use the cards at all, the cards won't contribute to your credit score after a while

I smaller balances will help your ratio-and your overall financial health Carrying balances does not help your scores

And don't close accounts Keep open your old or unwanted accounts, even if you paid them off and don't use them The more available and unused credit, the better for your score Besides helping your ratio, the old accounts help to increase the average age of your credit lines Renificant factor in the FICO score

One exception: If you know that you will spend more on unnecessary purchases just because you have the available credit, close the accounts You'll do e to your overall financial health than the relatively minor improvement to your credit score

Cautiously raise credit limits It helps to have a lot of available credit to help your ratio But opening a lot of new credit accounts at once will likely hurt your credit score in the short ter it would be to regularly ask your current credit card co a credit report” Applying for new credit cards is problematic because you have to use those new cards a little to show them as active accounts, but not use them so much it hurts your ratio All that assumes you can have open accounts and not use thes you can't afford

You can also i your credit card bill, bytwo credit-card payments a month This artificially lowers your balance reported to credit bureaus Make a pay cycle, which will lower the amount the creditor reports to the credit bureau on the state date

WARNING

Be sure todate and before the due date, so you aren't socked with a late payment, says Liz Pullia syste date and the due date to register you as paid on time, even if you made more than the minimum payment earlier in the et perfect If your FICO score is 780 or above, don't bother trying to iain very little-and potentially nothing at all-by succu to improve your score to 800 and above In fact,your score Just keep on doing what you've been doing

Establishi+ng Credit

Establishi+ng credit, or reestablishi+ng healthy credit after a bankruptcy, can be a challenge

Establish credit If you're new to credit or recovering froht have to apply for a secured credit card, which requires you to pay money into an account and then draw on it with the credit card Make sure it converts to a regular credit card after a reasonable period of time, for example, 18 months You can also apply for installment loans, such as an auto loan, which will help build credit by adding a different type of loan The probleh interest rate And if, because of that high rate you default on the loan, you're back to having terrible credit

A note on credit for college students Oddly, college students, with or without jobs, can get credit easily by getting a credit card Applications literally litter college cae students can't pay their credit card bills, mommy and daddy usually step in and pay That e student should have a credit card is a different e student can apply for a card without a parent's approval So, have a conversation before the first trip to caet a card

How You Pay

Spending smart isn't just about what you buy, but how you pay

The ultraorganized and responsible consu ement should stick with mostly cash For those in between, the decision lies in the details-although, everybody should be writing as few personal checks as possible

One reasonable strategy for consumers who fall between the ultradisciplined and financially challenged is to use cash and debit cards for everyday purchases Then use credit cards for big-ticket purchases and online transactions to ensure you get the added consumer protections credit cards provide

Noncredit Pay aside credit cards for a ood preference for cash payment methods