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BANKING & CREDIT -
Credit ratings are used by almost every institution that lends money to determine who qualifies for credit, as well as the interest rate charged. So, having a good credit rating is just not important for getting a loan or a credit card, it is necessary to get better interest rates and save money. Here are some tips on how to improve your credit rating, as well as how to track your credit rating at little or no cost.
1. In order to know what your credit rating is, and on what information it is based, you need to get your credit rating information and ratings from national credit agencies. These agencies are Experion, TransUnion and Equifax..
a. Recently, a law was passed that provides each consumer the right to one free
credit report annually, from each of these agencies. You can go to each agency’s
web site to apply, or go to AnnualCreditReport.com to apply. You can also call 877-
b. Check the information carefully to make sure it is accurate. If it is not accurate, contact the credit agency and follow their process to get the information updated.
c. If you planning on taking out a loan to buy a house or car, or are considering another large loan, check your credit report well in advance to make sure your credit report is in order, or you may be denied the loan based on incomplete or incorrect information.
2. Many items will impact your credit rating, including the following:
a. Whether or not you pay your bills on time. Make sure you are never late paying a bill in order to improve your rating. And, of course, if you have defaulted on any payments, this will hurt your credit rating significantly.
b. How much money you have borrowed through credit cards, home loans and other type of loans.
c. How many credit cards you have may influence your credit rating. If you have a large number of credit cards it may negatively impact your rating.
d. How much credit is unused on your credit cards and from other potential sources. In other words, if your credit cards are all borrowed to their maximum, it will hurt your rating.
e. Recent changes have been made to how being an authorized user versus an account holder on a credit card can affect your credit rating. Before the change, authorized users (even though they were not legally responsible for the credit card balance) were treated for credit rating purposes more or less as if they were responsible. Therefore, balances on the credit card were reflected on the authorized user’s credit report, and if balances were paid on time, it reflected well on the authorized user’s credit standing. Often, people without an established credit standing, or a poor credit history, would piggyback on a well managed credit card account as an authorized user, to either establish a credit history or improve their credit history. This was particularly helpful for young adults and spouses that had not established their own credit history. Of course, if the account was not well managed, through no fault of the authorized user, it reflected poorly on the authorized user’s credit rating. Now, if you are not an account holder, and are just an authorized user, the credit card account is not reflected on the authorized user’s credit report and essentially has no effect (good or bad) on the authorized user’s credit standing.
f. How often potential creditors have asked for information on your credit profile. If you have applied for a lot of credit cards or other accounts or loans recently, this will lower your rating, whether or not you got the cards or loans. So, try not to apply for every department store and other credit card offer that you receive. Also, try to avoid the special financing deals offered by some stores on large purchases, unless they are very attractive.
3. Generally speaking, companies that advertise that they will, for a fee, help you repair your credit rating do not deliver on their promises. No entity can remove accurate and timely negative information from a credit report. These companies basically take your money and deliver nothing of value. So beware of such schemes and look out for the following warning signs:
a. Companies that want you to pay for credit repair services before they provide any service.
b. Companies that do not tell you your legal rights and what you can do for yourself for free.
c. Companies that recommend that you do not contact a credit reporting company directly.
d. Companies that suggest you try to invent a “new” credit identity, usually by applying for an Employer Identification Number to use instead of a Social Security number.
e. Companies that advise you to dispute all information in your credit report or take action that seems illegal. If you follow illegal advice and commit fraud you could be subject to prosecution.
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