Jun 9, 2016

Credit 101: How to Check, Build, and Maintain Your Credit

Your credit score is one of the most important numbers in your life, so you will want to make sure you always keep it in as good a shape as possible. Lenders will use the number throughout the course of your life to judge you and decide whether they will provide you with items such as personal loans, credit card products, mortgages, apartments, bank accounts and more. Nowadays, you have to have a good credit score to qualify even for the simplest things.

The following is some information on checking, building and maintaining your credit score.

What Is the Credit Score?

The credit score is a numerical figure that describes the way a consumer handles loans. The elaborate calculation consists of five major categories. The categories that make the total credit score are:

  • Payment history
  • Owed amount
  • Length of credit history
  • Credit mix
  • New credit

The FICO credit score system is the most popular scoring system in them all. The lowest FICO score is a 300, and the highest FICO score is 850. A score of about 780 to 850 is what people call an excellent credit score. A good credit score starts at about 660 and goes to about 780.

How to Check Your Credit Score and Report

You can check your credit report and credit score a number of ways. First, you are entitled to one free credit report each year because of current consumer laws. A site such as FreeCreditReport.com can provide you with a copy of your credit report if you ask. You must first visit the website and identify yourself. Once you identify yourself, you will have immediate access to your report. The credit report is the full fledged report of your accounts, balances, payments, profile comments and the like.

Checking credit online is simple if you just want to check the score, as well. One way that you can receive your score is by signing up for a free service like the one that Credit Karma offers. Credit Karma has a five-minute registration and does not ask for any of its members to pay any fees. Credit Karma is an excellent site because it offers its members regular updates on the score and tips on how to better the current score.

Another way that you can receive a credit score is by signing up for a credit monitoring service. A credit monitoring service provides a suite of tools that will notify you if unexplained activity occurs with your credit score.

How to Build Your Credit Score

There are several ways that you can try to get yourself out of the rut of a failing credit score. One process that you can try if your credit falls below the desired threshold is a loan consolidation. A consolidation loan comes from a lender, and it covers the amounts of all of your scattered accounts. Instead of paying numerous lenders each month, you make payments to a single consolidation loan provider. The best part about consolidation loans is that they usually come with very low interest rates. Not only can you improve your credit score with a consolidation loan, but also you can save yourself money.

Credit report disputes can help you to repair your credit scores, as well. You should report anything that you see in your credit report that you do not recognize. You should also report any balances that are been misreported or not updated. Make sure that your address information is correct, and that the inquires that you see on the report are yours. You can initiate a dispute online for anything that does not look correct and the bureaus must investigate it. They must make a decision about the reported items within 30 days. Additionally, they must send you a copy of your report.

Debt settlements can help you if your creditors decide that they will take a smaller amount than what you owe them in exchange for settling the debt. It could be a means to eliminate your debts one by one. Negotiating with a lender may require a third-party that has experience with such issues.

A secured credit card is a good tool for keeping your credit above the water during difficult times. You first have to send a deposit that the creditor can use to repay your debt if that is necessary. Most lenders will then issue you a credit card for the amount that you deposited. Some banks like Capital One will give you a little more than you deposited. For example, you may be able to obtain a card that has a $200 opening line of credit just by offering $50.

How to Protect Your Credit Score

Protecting your credit score requires having someone watching it for you at all times. Credit monitoring services are good at that. Many companies offer services that will alert you the moment your credit score changes or someone uses your social security number to open an account. Some of the services start at $9.99 a month, and some of them offer free seven to 30-day trials of their products. The names of a few providers are Credit Karma and LifeLock.

All three credit bureaus offer the service for you, as well. Visit the website or give a call to ensure that someone provides you with the appropriate information that you need to protect your data.

Maintaining a Positive Credit Score

Maintaining a positive credit score once you get there requires you to practice responsible lending habits. Make sure that you pay your credit card bills at least one week before the due date so that they have time to process. Double up if you can afford to do such. Keep your inquiries down to a minimum because they can affect your credit score. Lenders may also think that you are desperate if they see that you complete many credit applications.

Goodluz / Shutterstock.com

Goodluz / Shutterstock.com

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