Tips to Help Your Credit Score
- Payment history has a huge impact on your credit score. Be sure to pay your bills on time. If you have missed a payment, get current and stay current with your payments. Remember, the longer your payment history is, the better your credit score will be.
- Keep in mind when you pay off a collection account, it will not remove it from your credit report; it stays on the report for seven years.
- If there is difficulty paying your credit cards, contact a credit advisor to
help manage your credit and eventually improve your credit score.
Manage Your Payments
- Keep your credit card balances low. High debt will have a negative effect on your credit score.
- A great way to improve your credit score is by paying down your credit amounts.
- Closing credit card accounts can negatively effect your credit score.
- Opening several credit cards in an attempt to increase your available credit could
potentially lower your credit score.
Take Care of Your Credit Score
- If you are just beginning to manage your credit, opening several new accounts will lower your average account age, which will have a significant affect on your credit score.
- Obtain a copy of your credit report and review at least once a year. Dispute any errors
or questionable items with the reporting agency.
Understand Your Credit History
- Shop around. Give yourself a couple weeks to search for suitable rates and features.
- Try to pay your account balances within the billing cycle of the credit card.
- Opening new accounts responsibly and paying them off on time will help re-establish your credit and will raise your credit score over time.
- Requesting your own credit report will not have an effect on your credit score. However, make sure that you get your report directly from the credit reporting agency or through an organization that is authorized to issue credit reports.
- Don't allow people you don't know well to have access to your credit card.
Be Smart with New Credit Cards
- Don't open unnecessary credit cards; it probably won't raise your credit score.
- Don't apply for credit your don't need, it may impact your ability to borrow. Credit cards and installment loans do raise your credit score as long as you manage them well.
- Closed accounts will remain on your credit report and may still impact your credit score.
- Some new things that can effect your credit score are municipal government fines, such as
library fines, unpaid parking tickets and property taxes.
Be Responsible with Your Credit
For Your Information...
The following categories (with percentage of impact) are used by the main credit reporting agencies with respect to rating your credit worthiness.
- Payment History-35%
- Amounts Owed on Accounts-30%
- Length of Credit History-15%
- New Credit Inquires-10%
- Types of Credit Used-10%
How to Choose the Right Credit Card
Which One Should I Choose?
These days, it seems like everyone has one or more credit cards in their wallet. Ranging from business owners to students, there is an abundance of credit cards to choose from.
So how do you choose the right one? There are several factors that you should keep in mind while you're credit card shopping.
- Age
- Spending habits
- How much money is needed
- Income
- How you plan on paying it back
- Number of credit cards you already posses
There are many different banks offering credit cards with a variety of options. While "wading" through them can be challenging, be patient and wait until you find the most suitable card for your needs. If you initially choose poorly, you'll perhaps end up paying membership fee's or even wanting to close the account (not a positive move if you want to optimize your FICO score).
Some things you should know before you start credit card searching
- What is the purpose for the credit card?
People get credit cards for many different reasons; some to earn cash back points or obtain airline miles with day to day purchases or some people wish to consolidate their current credit cards to a low interest card.
- Are the amounts of your purchases high or low?
This is important to know so you get the appropriate spending limit on your credit card. For instance, a credit card for a student is typically going to have a low or moderate spending limit compared to a card used for business purposes, which would have a high spending limit or not one at all.
- How do you plan on paying it back?
Do not "dig" a financial hole for yourself! Make sure you have the consistent income to repay your debts. In addition, check the best way to repay each card account as they will differ on re-payment terms. Some cards offer advantages for paying the charges off quickly, other's allow reasonable re-payment terms, while still others are set-up to cost you the maximum interest from the moment you borrow the funds.
- Are you interested in special offers?
There are many cards that offer things such as member benefits or special rebates. It is good to know if these types of benefits are of interest to you before deciding on which credit card you select.
Once you have taken the above factors into consideration and decided which card is suitable for you, it is up to you to maintain the responsibility of having a credit card and properly manage your payments. If used irresponsibly, major damage to your credit score will occur and will ultimately have a negative effect on your future ability to borrow.
Credit Card Glossary
Average Daily Balance
The method by which most credit cards calculate your payment due. An average daily balance is determined by adding each day's balance and then dividing the total by the number of days in a billing cycle. The average daily balance is then multiplied by a credit card's monthly periodic rate, which is calculated by dividing the annual percentage rate by 12.
Annual Percentage Rate (APR)
A yearly interest rate that is composed of fees and costs paid to acquire the loan. Banks and lenders are required by law to disclose the APR. The rate is calculated by taking the average compound interest rate over the life or term of the loan.
Balance Transfer
The transferring of an unpaid credit card debt from one bank or card issuer to another. Banks often offer "teaser" or temporarily low interest rates to encourage balance transfers.
Cash-Advance Fee
A bank charge for using credit cards to obtain cash. This fee can be stated as a percentage of the amount of the cash advance or as a flat fee. Generally, cash advance fees are extremely expensive and interest often begins to accrue the moment the cash advance is approved.
Finance Fee or Charge
A fee charged for using a credit card. The fee is composed of interest costs and other fees.
Grace Period
If a credit card account has no balance, the grace period is the interest-free period the bank allows between the transaction and the billing date's. This period is generally between 21 and 30 days. If there is not a grace period offered, finance charges will accrue the moment a purchase is made with the credit card. There is no grace period for balances carried month on a credit card account.
Late Fee
A fee paid by the cardholder if they are late with their minimum payment. These fees are often substantial and late payments can effect the cardholders credit score. Late payments can also invite the bank to increase the cardholders A.P.R.. If the cardholder has not missed a payment within the prior year, the bank may reverse a late fee if the cardholder contacts the bank and requests a waiver.
Minimum Payment
The minimum payment amount a cardholder can pay to prevent the account from going into default. Some banks and issuers will require a high minimum if the cardholder's credit score is low. Most banks and issuers maintain a minimum payment rule of 2% of the outstanding balance.
Over-Limit Fee
A fee charged for exceeding the credit limit on the card.
Periodic Rate
The interest rate given in reference to a specific period of time. The monthly periodic rate would be the cost of credit per month; the daily periodic rate would be the cost of credit per day.
Secured or Deposit Card
A credit card provided by a bank or card issuer in return for a deposit which can be debited by the bank in the event of default. Such cards are generally utilized by People seeking credit for the first time or people that have low credit scores.
Teaser Rate
Also referred to as the introductory rate, it is a relatively low market interest rate offered by banks and issuers to attract new customers or bait existing customers to transfer balances or open new card accounts.
Variable Interest Rate
This is the percentage amount that the cardholder pays for the use of the lenders money. This rate is influenced by and varies up or down periodically based on changes in various market interest rates.