Some of this is straight-forward. Some of it isn't. While there are things that professionals can do to help you build and maintain a good credit rating, there are a number of things you can do yourself. Here's a good place to begin...
1. Pay your bills on time. Creditors scrutinize your credit history. If you pay your bills on time, this reflects well on you. If you have a record of delinquent payments, you might want to consider credit counseling on how to better manage your finances. If you can't make a payment, or can only pay it in part, communicate it. You'll find a lot of places willing to work with you. Avoiding the situation never helps.
2. Manage your debt. Your debt/income ratio - the percentage of your income that goes to paying off debt - is another gauge of your financial health. You can calculate this ratio by dividing your monthly minimum debt payments (excluding mortgage) by your monthly take-home income. If your debt payment absorbs: Less than 20% of your income, you are doing well. Between 20% to 35%, consider reducing your overall debt. More than 35%? Consider getting aggressive about or some type of aggressive debt-reduction strategy.
3. Don’t over-apply for credit. Limit the number of loan applications you submit. Each bid shows up as an inquiry in your credit report. Even if you’re just comparison-shopping for the best rate, too many inquiries can be viewed as a desperate bid to obtain credit to get out of financial trouble. A lot of people don't realize that inquiries, too, can cost them valuable points on their credit report.
4. Shred your documents. Be sure to destroy any piece of paper with Social Security or credit card numbers. Thieves often go through garbage retrieving people’s identification so they can use this information to commit fraud. In other words, don’t give information away. For example, never include your Social Security Number on checks or driver’s license. Also, DON'T KEEP OR CARRY YOUR SOCIAL SECURITY CARD IN THE SAME PLACE AS YOU KEEP YOUR DRIVERS LICENSE. I see this one all the time. You're making yourself an easy target.
5. Check your credit report on a regular basis. The only way to protect your name and credit is to be proactive. With the rise of identity theft cases, it is important to review your credit files, and to report any inaccuracies to the major credit reporting agencies. I recommend IdentityGuard.com for this. Great service! I suggest it to all my clients. The chances are that there are errors in your reports. Recent news reports have suggested that there are tens of millions of mistakes in Americans' credit histories. Make sure you're not surprised by any in your report.
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