If you think paying your bills on time is all you need to do to maintain good credit, it’s time for a quick lesson from consumer credit expert Stephen Snyder. “Fifteen years ago it didn’t matter,” Snyder writes in his book, “Do You Make These 38 Mistakes With Your Credit.” “As long as you paid your bills on time, your credit rating was considered good.”
Today, most lenders use a credit risk rating based on the contents of your credit report to obtain a credit score. The credit score system is designed to show your credit worthiness at a particular point in time. Your score is used to determine if you will be offered credit, and at what interest rate.
The factors that credit scores are based on generally include: payment history, amount owed, length of credit history, amount of new credit, and type of credit. Lenders also review credit reports for bankruptcy, collections, judgments, and foreclosure.
According to Snyder, millions of Americans are denied credit or pay too much because they make one of 38 common credit mistakes.
Here are five mistakes worth noting:
- Paying cash for everything doesn’t establish your ability to manage credit
- Closing accounts can shorten your credit history and lower your credit score
- Bringing your credit card balances to the maximum limit each month can reduce your credit score
- Applying for credit before knowing what guidelines the lender will use to approve or deny your application
- Buying a car or appliances on credit while you are applying for a home mortgage can reduce your credit score
Your credit scores are an important financial tool. By increasing your credit scores, Snyder says you can:
- Reduce the interest rate on your credit cards and mortgage
- Save tens of thousands of dollars in interest costs
- Get approved for no-down-payment financing
If you want to learn how to avoid mistakes with your credit, increase your credit scores and improve your lifestyle, you can get the full list of 38 mistakes and Snyder’s book at Amazon.com.
Article provided to the La Quinta Chamber of Commerce – GEM Publication November 2006 page 17.
http://www.lqchamber.com/pdf/gem_nov06.pdf
