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Credit scores seem to be a hot topic in the personal finance sphere these days. The economy is coming back and, as a matter of fact, even Dow has experienced astronomical increases lately. With that said, as more and more people start to stand back up on solid ground, they tend to start really thinking about their credit scores. And, they should. Their credit scores can help them to buy houses, cars and more! Knowing that people with high credit scores tend to pay thousands less in interest each and every year on mortgages, auto loans and credit cards, more and more consumers are starting to fix their scores. However, if you are in the process of improving your credit score, there are a few things that you really should know…
You May Have Been Lied To: Several people go online, find the first article that talks about improving credit scores and, BAM! They’re ready to get started. But, unfortunately, not everything online can be trusted. Driven by affiliate profits, there are several articles out there written for the sole purpose of making a buck! Although, I promise, I know what I’m talking about, YOU SHOULDN’T BELIEVE ME! Before doing anything that you believe will improve your credit score, look for other, trusted resources that back up the theory. If you are going to hire a company that you believe will help you improve your credit score, make sure to do your research on that company before paying a dime!
Disputing A Negative Report Doesn’t Mean It Will Go Away: Honestly, this is one that gets me pretty mad and, unfortunately, I see it all the time! There are so many articles that tell you that if you have old debts, chances are, the lenders no longer have the paperwork that you signed. So, dispute it and, magically, it falls off your credit report. Bulllllony! Think about it from a practical perspective. If you were a lender that has a customer that is past due, don’t you think that you would make sure you had a system to keep track of your paperwork and contracts? I know I would! The reason this gets me so angry is that so many people get their hopes up for a quick fix. When the find an honest, step by step credit improvement resource, they quickly leave and look for a quick fix! Due to false information about credit score quick fixes online, more and more consumers are going backward when they should be going forward.
Closing A Credit Card Isn’t Always A Bad Idea: There are several factors at play when it comes to closing a credit card. Therefore, without knowing about the credit card you plan to close in relation to your credit report, no one could tell you if it’s a good idea to close your card or not. When making this decision, you should take 2 things into account:
- How Long You’ve Had The Card – One of the factors reporting agencies use when calculating your credit score is the average life of your revolving accounts. The longer the average, the better. Therefore, if you want to close your youngest account, it may be a good idea! Doing so will bring the average life of your revolving accounts up.
- How Much Credit Is Available – Another key to your credit score is your debt to credit ratio. Therefore, if you have a pretty good amount of available credit, I’d say 30% or higher, closing your account will harm your score. However, if your account is completely maxed out or close to it, closing it may not have any effect on your credit score at all. Or, at least this variable of your credit score.
You Can’t Expect To Go From Bad To Great Credit In 3 Months: When you want to build your credit score, you are not making a 3 to 6 month commitment. Your credit score is based on your financial history. If you have no financial history, you have no credit score. If you have a bad financial history, you have a bad credit score. The only way to change a score from bad to good is to make lifestyle changes and show lenders that you are financially responsible to take on new loans.
Improving your credit score is a feat that takes nothing more than a commitment to making practical financial decisions and a plan for success. All the information that you need to build your credit score is available at your fingertips through articles like this one. However, it’s up to you to do your research and figure out, which options make sense and which don’t.