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Manage Your Credit and Credit Scores, Pt 2

By

George Duarte

The “Real Deal Guy” (SM)

In our last installment I discussed what a credit score is, some of the inputs that affect your scores, and the great importance of strong scores (over 700). In this part, I will give you some tips to help manage and increase your score, and keep it high.

1. Be very careful about applying for new credit- resist those offers in the stores that say “sign up for a card today, and get an additional 20% off” Whenever a consumer applies for credit an inquiry hits your report, and can deduct anywhere from 5-25 points off your score, depending on how many recent inquiries you have. Many people play the “credit card shuffle” game, paying off credit cards with lower interest rate credit cards, and transferring the balances. While this may seem like a good idea, it is in fact very bad for your credit scores for 2 reasons- you will have a continual number of inquiries, and you will also lose points because you will not have a long history of credit with the same creditors- one of the best ways to boost your score.
2. If you are in the loan process, do not pay off collections and charge offs, negotiate with the creditors, come to a payoff agreement, then pay them off in escrow, which a lender would require anyway. If you are not in the loan process, and do not expect to be applying for a loan for some time, then now is the good time to get those debts cleared up. Feel free to consult with me on the best methodologies for negotiating with creditors-that can be a whole column by itself- I don’t have a credit repair service, just help to advise consumers on how to go about it, and I don’t charge a fee for this advice.
3. Do not close credit card accounts, this is related to item no. 1 above, especially if you have had them a long time. Just pay them down to zero, but leave them open.
4. Do not consolidate your debts into one or two cards, this will hurt you in a couple of ways. The first way will be that you would probably have a balance higher than 30% of your approved loan limit on that card, and will lose points that way. Secondly, you would lose points by closing the accounts that are being consolidated, as mentioned above.
5. Make all your payments on time, even if they are the minimums! If your minimum payment is only $10 or $20, don’t skip it and pay double next time, pay it!
6. Do NOT co-sign for loans for anyone, friends, relatives, kids. More people have had their credit ruined through auto repossessions and other credit problems they have co-signed for, it is a cryin’ shame. If your friends, relatives have bad credit, that is their problem, don’t let them drag you down, too.

So those are the most important things to keep in mind in managing and defending your credit history. I cannot stress strongly enough how important it is to have strong credit-

Till next time

George Duarte, MBA, CMC, CMPS

The “Real Deal Guy” (SM)