to Improve Your Credit Health in 2007
Branch Manager, U.S. Bank
Having a good credit history is more important than you might realize. Not only does it give you a quick approval for a major purchase like a car, boat or home, it can also be your ticket to getting better interest rates on loans and credit cards, which can help you save money in the long run. It may also be a deciding factor for insurance companies, landlords and potential employers, who can legally view your credit.
One of the tools financial institutions like U.S. Bank uses to gauge your creditworthiness is your FICO score. A FICO score is the credit score created by Fair Isaac Corporation. It ranges from 300 to 850, and a higher score tells banks and creditors that you have a positive track record for paying off your debt in a responsible and timely manner.
Here are four steps you can take to help give your FICO score a boost in 2007 and beyond:
1. Check your credit report. Recent legislation has allowed for an annual free copy of your credit report from each of the three credit reporting agencies at www.annualcreditreport.com. You can access a report of what information credit agencies have on file for you that is used to determine your FICO score, including what credit accounts you have opened and closed, how many payments youíve made, what your balances are on the accounts, and how often you make payments on time. Consider closing those accounts that were only used once for that special discount offer at the store, because having too many in your name may adversely affect your score. Also, check these reports for accuracy each year, and if you do find an error, notify the reporting agencies immediately, along with proof to support your claim. Credit bureaus are bound by law to correct mistakes at no charge.
2. If you need to establish or re-build your credit history, consider opening a credit card account. Maintaining a credit card account in good standing is a great way to build a credit history that shows lenders you are responsible and creditworthy. U.S. Bank also offers a college rewards card that can build credit in a studentís name while at school, and earn points toward gift cards or merchandise. Or if youíve had some difficulties with maintaining credit in the past, you can get back on track by establishing a secured credit card, with a set credit line equal to an amount held in a savings account. After a period of making positive payments, the savings funds are returned with interest, and a regular credit card issued.
3. Make your credit card and loan payments on time. To err is human, and itís easy to accidentally overlook making a payment before the due date from time to time. But there are some easy ways you can avoid this potential FICO score buster. For example, you may want to mark your calendar with a reminder a few days in advance of your monthly due dates for your rent, utility bills and credit card payment dates. Or for an even more low-maintenance method, you can set up automatic payments through online bill pay services so your payments will always be on time.
4. Be proactive if you see financial roadblocks ahead. Borrowing on one debt to pay for another, not keeping track of what has been put on cards, receiving calls or letters from credit agencies, and being denied or cancelled credit are all warning signs that your credit record may be in jeopardy. If you have an unexpected financial hardship such as the loss of a job or major health problems and anticipate that you wonít be able to make payments on time, contact your lenders as soon as possible to notify them of the situation. Many times they will be able to work with you on alternative payment plans as long as you are being proactive and up-front with them.
Just like your physical health, maintaining good credit health is an ongoing process, and your specific credit health needs will likely change over time. But with a little focus and attention during 2007 and beyond, you can reap financial benefits that will last a lifetime.