Before I even knew what credit was my mother emphasized to me over and over again to have good credit. Credit is one of those things that you don’t know it is important until you want something and you cannot get it. The reason why you reading this blog is because you want to know how to get good credit. Which means that either your credit score is lacking or you do not have credit at all.
Which every category you fall into I will tell you how to get good credit.
Reasons to keep good credit:
- Many good jobs do a credit check and if you have bad credit they will not hire you.
- You will have lower interest rates.
- You have the right to demand better deals.
- You can get better loans as in home loans or business loans.
Do not cosign for no one.
And I mean no one. Don’t do it. Unless it is for your spouse other wise, do not co-sign for your baby daddy, boyfriend, and his mother and in some cases not even your mother. I have seen a parents jack up their children’s credit before. Think of it this way, if they cannot even take care of their credit then why would they take care of yours. That is what co-signing is essentially. The person has ruined and they cannot get anything on their own merit, so now need yours.
True Story- My son’s father way back when ask me to co-sign for him a car. I told him no. Then he said that if it was me that he would co-sign for me, in fact he said he would co-sign for anyone. And that is the prime example of why he has bad credit, because he is out there co-signing for everyone. And we do not even see each other now, so that co-signing mistake would have continued to haunt me and my credit to this day.
Just Say No to Credit– Credit cards can break you. If you run up credit cards and do not pay them off in the SAME MONTH then you are running up your debt ratio. As that balance rises on the credit card that means you are digging yourself deeper and deeper into debt, and making the minimum payment is NOT helping your credit. Instead do not get credit cards. If you must have one only charge the amount that you can pay off per month.
Exceptions- There are times when credit cards are good. When you do not have any credit and you need to build your credit. You can get a credit card, charge a few things on it and pay off the WHOLE balance in the SAME MONTH you charged it up. This has a positive impact on your credit score.
Pay it off or do not pay it at all- This sounds like a backward concept but if you have an outstanding balance on your credit that you have not paid in a while do not pay it until you can pay the whole thing. After a while the impact that the outstanding balance has on your credit becomes less and less if you do not pay it. For example if you owe Comcast $500 in 2014 and you let it sit unpaid an untouched until 2016 the effect that it has on your credit is less significant. But if in 2016 you put $100 toward that Comcast bill then you have reactivated it again and even though your debt is less it effects your credit in a negative way because it shows as a recent unpaid balance because you made a partial payment. Instead wait until you have the full $500 and pay Comcast off in full which will give your credit score a boost.
Other tips to consider:
- If you cannot afford to pay off the balance call the creditor. Most of the time they are willing to work with you on a lower amount.
- An inactive debt drops off after 7 years. Although you need to pay your bills. After 7 years a debt that has not been paid and is untouched for 7 years will drop off your credit.
Paying off Big Debts Gives Your Credit A Big Boast– For example paying off your car will result in a big credit boast. Paying off your house will result in a big credit boost. This is why when you buy a car or a house try to put down as much as possible so that you do not owe as much on the loan. Then pay off the balance.
Things you want to avoid:
- Getting a car, not paying it off, getting a new car and having two loans to pay off. One for the old car’s balance that you never paid and then the new car.
- Selling a car or house and not getting enough money through the sale to pay off the loan. You are still responsible for the money owed.
Pay Your Bills:
This include regular bills, hospital bills, property, tax all of it. And pay them in full. If you cannot pay your bills in full then set up a monthly payment plan that is affordable and you can pay on time. Also having bills and paying them on time in full, increases your credit score. So if you want to build credit then try getting a cell phone bill or utility bill that you pay on monthly.
A crazy thing that happens in the credit world is that if you pay for everything in cash and have no bills; this can negatively impact your credit. This is one of the down sides to credit. So if you get married and your husband takes care of everything and NOTHING is in your name, you score will more than likely decrease over time.
Checking your score too much
There are exceptions to this rule such as credit karma. But typically when you have people run your credit to see if you qualify for something, then it will impact your credit in a negative way. It is important to monitor your credit and know your credit score, before applying for things. And not apply for things that you know you will not qualify for. Check out Credit Karma, they allow you to check your score for free. You can also check your credit as much as you like and it not lower your score.