Monday, July 23, 2012

How To Protect Your Credit

Protecting your credit is a good start to a fiscally responsible lifestyle.  But that begs the question, How do I protect my credit score?  What simple and practical steps can I do to make sure I don't run into credit problems?  Here's a few:

Pay Your Bills In-Full And On Time

Your credit report shows the past 2 years of bill payments made on any credit line.  It shows if they were a partial payment or paid late, and can have drastic affects on your credit score.  Along with lowering your score, these also are able to be viewed on your credit report by future lenders making them less likely to lend to you.  The simple solution is to make sure you set payment reminders for yourself so you don't forget to pay your bills.  If you can't pay them in full, talk to your lender and try to setup an alternative payment plan so that your credit isn't affected.  Most lenders will work with you through financial hardships to insure the best outcome for both sides.

Don't Take Out More Loans Than You Can Handle 

Lenders used to (and some still do) give out money to people that really had no chance of repaying the loans.  This in part led to the financial recession in 2009.  Don't be one of the people that bites off more than they can chew because that puts you in a spot where you can't make payments and have to default on the loan.  This will essentially nullify your credit score for years to come.  Filing for bankruptcy will generally cause your credit score to be completely destroyed for 7-10 years.  So before applying for any loan, make sure you are in a financially feasible place to repay the loan without any issue.

Keep Only 2-3 Credit Cards

The number of lines of credit you have will help your credit score to a point.  Showing that you are responsible on multiple credit lines does increase your score.  However, if it gets to the point that you have 6 or 7+ lines of credit, it can start to hurt your score since that is generally more than people can handle.  To prevent this, keep the number of credit cards you have to a minimum, generally 2 or 3 is the sweet spot to shoot for.  Following closely with that, make sure you pay off your credit card bills every month in their entirety.  This will both help your score and make you avoid having to pay interest which could then exacerbate any financial issues you were having to begin with.

Take these simple tips to heart and you will be on the way to fiscal responsibility and a brighter financial future.

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