Cleaning up Bad Credit, Keeping Good Credit, and Restoring or Fixing Credit Scores

TIP #1 Order a copy of your credit report at least once a year from each of the three credit reporting companies to stay on top of changes to your credit profile and to check for identity theft.

TIP #2 Search for a Credit Card to help you build a credit rating

Since your credit score will affect whether you can get loans and the rates you’ll pay on your loans, dictate your insurance rates and sometimes your eligibility to rent an apartment it is good to keep your credit report record polished and clean. Here are a few tips for a clean credit report:

• Pay your bills on time. Yes that means credit cards, mortgage loans or rent payments. Late payments make a huge impact on your credit history just behind bankruptcy or tax liens.
  Establish credit early in life. Preferably while in college or high school start applying for credit cards but keep them locked up so you will not be tempted to use them. Make sure they are clean and active contributing to giving your credit score a boost.
  Leave your credit card at home when you go to the mall just use it for necessary expenses and pay it as soon as you receive the bill.
• Set up automatic monthly payments for gas, water, and electric utilities and telephone services on a credit card account or bank account so you will not accidentily miss payments.
• Budget your bills and creditors. Not a hard task to do once you get used to doing it. Start out with a financial software program or some easy excel spreadsheet. If you are not computer literate then jot down on paper every time you spend money on your credit cards, how much per month you will send off to lenders, and calculate your income minus expenses. It does not take an accounting major to do this.
• Watch your credit card expenses closely and do not max out available credit on credit card accounts. Lenders will turn their noses up at someone that has trouble managing their finances. So we always advise you to keep your credit cards to a minimum of one or two. Maintain a small number of credit cards and close unused accounts. Creditors look at your potential for going on a spending spree and falling too deeply into debt. The more credit cards you have the larger your debt potential.
• Contact your card issuer immediately if you are unable to pay your bills on time, or if you have found an error in a bill – make sure all statements are in writing. Also contact them if you have a late fee that you feel you were just a few days late or so, they will normally take it off out of goodwill to keep you as a customer. Keep in contact with them regularly.
• Don’t apply for too much credit in the same time period. Applying for too many loans or credit cards at the same time can hurt your credit score. Each request for your credit history other than your own request reduces your FICO / Beacon score. That is why we recommend one search partner to find you the lowest rates for mortgages or credit cards. Other than that you don’t need to keep applying unless you wait a few months after you have given one lender or bank your SSN number. Creditors may assume that you are either applying for too much credit because of financial difficulties or taking on more debt than you cannot repay
• Be consistent when filling out credit apps to ensure that everything is recorded in a single file, as opposed to multiple files or someone else’s file. Watch out for inconsistencies in use of “Sr.” and “Jr.”
• Check your credit reports for errors or inaccuracies. Get a free credit report!
• Stay on top of any legal matters involving your credit. If a business threatens and sends you a letter for a past due hospital bill but you are waiting on the insurance company to pay for it then make sure they do not report that late bill to your credit history and reduce your score. Contact a firm such as Lexingon Law if you have any problems with this.

Also remember to keep your debts reasonable. Financial experts say that, as a rule, nonmortgage debt payments should not exceed 10 percent to 15 percent of your take-home pay each month.