Home Equity Line of Credit

You have just checked your credit score and found out it is bad. After you recover from the shock, what do you do? There are several things you can do to help bolster a sagging credit status and begin to rebuild your credit score. If you have recently applied for credit and been turned down, you will get a letter in the mail detailing that bank’s reasons for the decision. This can be a great place to start resurrecting your score. The issues the bank gives for turning you down are probably the things most impacting your negative score so if you can change them you will be one step ahead of the game next time you go to apply for credit.

Being forewarned is better than being sucker punched however. Instead of waiting for a bank to tell you what is wrong with your credit when you need their help the most, find out ahead of time. It is now possible to get a free yearly credit report and everyone should take advantage of that. Examine your report carefully and make sure there are no incorrect entries on your report. This can, and does happen so rather than being penalized for someone else’s mistake, take care of these issues by reporting them to the appropriate credit bureau.

Do not close old unused accounts. People used to think that having too many credit cards made them a bad credit risk. However a large part of your credit score is based on how much you owe compared to how much you have available. So closing cards you have available credit on, but do not use only makes your available credit lower and your debt compared to credit higher. Keep your cards open, just do not use them.

Another reason for keeping those old, but unused accounts open is that creditors like to see a long history of credit. The longer you have had credit available to you the better. Closing an old card may make your length of credit shorter and lower your score.

Pay off outstanding debts. While this may seem like a no-brainer it is often the hardest thing to do. Many people pay the minimum monthly payments on their accounts thinking that is enough to give them good credit. It certainly doesn’t do damage to their credit the way late, or non-payment does, but just paying the minimums and using the cards keeping the limits high has a negative impact all its own by maintaining a high debt to credit ratio.

Get on those registries. Keep lenders from checking your credit rating in order to send you junk mail offering you credit based on a pre-approved score that you didn’t ask for. All of those inquiries look bad on your credit report.

Pay your bills on time. Again, this would seem like a no-brainer, but even a day or two late can get you dinged by the credit service and lower your score. Getting your payments in on time every month for over a year is a great way to rebuild your credit status.

To that end one of the best ways to begin rebuilding your credit status if you have really bottomed out is to get a secured credit card and use it to purchase one or two fair sized items, and then repay the debt with regular higher than required monthly payments for a year.

As a consumer you ve learned the importance of establishing a good credit rating with your lenders. Whether you are shopping for a new home or auto, or searching for the best deals on insurance, your credit worthiness will be judged by your credit rating or credit score.

A bad credit history or bad credit habits will place black marks ? on your credit profile. These include things such as late payments, having an account assigned to a collection agency, and of course bankruptcy.

Establishing good credit habits and therefore a good credit rating will improve your credit worthiness. This will be reflected in potential lenders offering you substantially lower interest rates and better deals on credit offers.

Here are 4 tips to help you create a shining credit profile:

1) Pay Your Bills On Time

Lenders only have your past payment history on which to decide the type of credit risk you present to them. How you pay off your debts now indicates to them how you will pay off future debts.

2) Don t Use Too Many or Too Few Credit Cards

How much is too much ? How little is too little ? Many credit experts and financial planners suggest two to four credit cards is just the right mix.

3) Pay At Least The Minimum Due

Always pay at least the minimum due payment, but never less. And remember, just paying the minimum payment means it will take you years and years to pay off that credit card.

Example: Paying off a $2,000 credit payment at 18% APR with a minimum monthly payment of 2% ($40 dollars or less) will take you 30 years to pay off the amount plus interest.

4) Review Your Credit Report Regularly

Monitor your credit report from all three major credit bureaus – Experian, TransUnion, and Equifax – on a regular basis. Check your credit profile at least annually. Review it carefully and make sure that any past mistakes or disputes have been corrected.

Also, if you notice an account listed that you know that you have not personally opened, contact that creditor and the credit bureaus immediately. This could be a sign that you ve had your identity stolen. Request to have a fraud alert placed on your profile and account to protect yourself and your credit. Identity theft is the fastest growing consumer crime in America, with an estimated 1 million people victimized each year.

Establish good credit habits early in life and reap the benefits that your good credit rating will provide you for the rest of your financial future.

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