Credit

Guest Post: How to Spot the Signs That You Might Be Living Beyond Your Means on Your Credit Card


How to Spot the Signs That You Might Be Living Beyond Your Means on Your Credit Card

 

Today, I would like to introduce to you Patty Moore, a newish blogger at workingmotherlife.com She has some amazing tips and insight on how you may be living beyond your means on your credit card and way’s you can stop. I’d like to welcome her to my blog and to the blogosphere. You can connect with Patty on her blog referenced above and on Twitter at WorkMomLife!


It’s actually not that difficult to know when you might be living beyond your means on your credit card. By definition, you are living beyond your means when you need a credit card to fund any part of your lifestyle. But, it doesn’t usually dawn on people that they have a real problem until they are knocking on the door to credit card hell. Right now there are millions of Americans carrying an average balance of nearly $16,500 on their credit cards who are knocking on the door, beyond which is a life of financial servitude and dashed dreams. You don’t have to be staring into the abyss before realizing you have a problem. Just look out for the following signs.

You Carry a Balance on Your Credit Card

If you carry a balance month to month, it means you are spending more than you can afford. It may have started innocently enough with a small splurge and the rationalization that you would pay it off in a few months; but, because you are spending money you don’t have, it difficult the find the money to pay it off. Soon, you get accustomed to carrying the balance and build the monthly payments into your budget.

You know your credit card balance is getting high when you don’t bother to check it because you know you can pay it off anyway.

You Can’t Pay Any More than the Minimum Payment

If you continue with your spending habits — using the credit card to pay for things you can’t afford to pay for with cash — your balance increases. Unless something changes with your income or your budget, you will continue to carry a balance and it will grow. When your balance grows to $5,000 and you can only afford the minimum payment, you will spend more than $8,000 over 13 years to pay off the balance. When you start living your life making only the minimum payments, it’s time to reevaluate your lifestyle.

You Play the Credit Card Shuffle

The credit card shuffle is like robbing Peter to pay Paul. You’re juggling payments between the cards because you don’t have enough money to make the payments on time. You might make a payment on one card and take out a cash advance to pay another card.

You Can’t Qualify for a New Credit Card

One of the first things people do when they get into credit card trouble is to apply for another credit card. The day finally comes when you can no longer qualify because you’ve run up your credit utilization and you’re only making minimum payments, which causes your credit score to fall. If your credit card spending results in a late payment, you’ll have trouble getting another credit card for a while.

Budget? What Budget?

You may start out with a budget, but, when you start using credit cards to meet your living needs, the budget becomes obsolete. A part of it is denial because you don’t want to see how badly you’ve blown your budget. The other part is it is the recognition that you can’t really afford the lifestyle you are pursuing. If you had stayed strictly within your budget, to begin with, you wouldn’t be in the mess you’re in. Getting back on a budget is the only way out of the problem.

You Have No Savings

This really should be your first clue. If you aren’t saving money for an emergency or for your financial future, you could be on the road to financial ruin, especially when you carry credit card debt. What happens when you do have an emergency — your car blows up or you have a big medical emergency and can’t work for six months? A lifestyle pursuit should be put on hold until a six to 12-month cash reserve has been built up and you have the ability to set aside 10 percent of your income in savings.

When You See the Signs

The worst part of getting into credit card trouble is it’s a lot like getting into quicksand. Unless you do something immediately to get yourself out, you will only struggle and sink further. At the first sign, you should take these essential steps to correct the problem and turn things around.

  1. Reevaluate your lifestyle needs. You may have tried to bite off more than you could chew with your lifestyle choices. It’s time to get back to the basics of what you really need at this time in your life.
  2. Stop using credit cards. Put your credit cards on ice and commit yourself to cash. It guarantees you will only buy things you can actually afford.
  3. Establish a strict spending plan. Budget like you really mean it. Cut out the non-essential spending until you pay off your debt. Build your budget around your top priorities, which are to pay off debt and save.
  4. Set a goal to become debt and credit card free. You’ll enjoy the taste of financial freedom much more than an expensive dinner you can’t afford. Thinking about refinancing your credit card debt using a personal loan. Personal loans are relatively easy to obtain. They offered by a wide variety of financial intuitions including traditional banks, online lenders, and credit unions. By using a personal loan, you can lower your total interest expense and expedite your debt payoff.
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9 Way’s To Protect Your Identity

9 way's to protect your identity
Protect Your Identity

In today’s society, identity theft is all to common. It seems as if every time you listen to the news, another corporations system has been hacked and the hackers made off with thousands of customers credit card and identity information. We even hear of identity thieves being able to obtain your credit or debit card number as we stand in line to purchase groceries. As technology and communication forms change, criminals are finding different way’s to prey on innocent hardworking people. The good news is-you can take some simple steps to protect your identity and save yourself from many headaches in the future. Read on to find out 9 way’s you can protect your identity.

1. Remember To Take Your Receipt. Often times I have failed to take my receipt, because I knew the cashier at a certain store, and I trusted that she would dispose of it for me. Luckily for me she did properly dispose of it. Certain receipts may contain personal information, so never leave your receipts.

2. Keep Your Social Security Number Safe.  Never, ever keep your social security card in your wallet. Make sure to keep it in a safe place. Make sure any other documents that may contain your social security number are kept in a private safe place.

3. Don’t Give Personal Information Over The Phone. This is something that I constantly remind the older people in my family. Be very wary of anyone who requests your personal information via telephone, especially if they are calling you and you are not the one placing the call.

4. Report Lost Or Stolen Cards IMMEDIATELY. Alert the creditor of each card so they can cancel the lost or stolen card and issue you a new one.

5. Beware of Scammers. I know we all hear about the email scam’s where you receive an email telling you that you have inherited millions of dollars, or something to that effect. Scammer’s even try to make you believe that they are employees of certain companies, like the Alabama Power scam presently going on. Don’t give any personal information via email and make sure to research and check people before conducting personal business.

6. Inquire About Privacy Policies. Every business should have a privacy policy. Check and see what information they need from you and why they need it, that way you don’t disclose more than what is needed.

7. Only Log Into Personal Accounts From Home. I am guilty, I sometimes log into my bank account at work. I feel safe at work, and maybe some of you do too. Feeling safe is no excuse, you should never conduct personal business on a public or work computer.

8. Go Paperless. Having your account statements sent online in a secure environment prevents them having to go through the mail where they can be stolen. If you are like me and just have to have a paper statement, have a separate mailing address where there is someone there that can retrieve the mail as soon as the mailman puts it in the box.

9. Shred Your Junk Mail. I know you are thinking, why would I shred my junk mail, it doesn’t have my personal information on it. WRONG! It has your name, and that may be all an identity thief needs to carry out their wicked plan. Sometimes, credit card offers have a temporary card in them and in the wrong hand’s this card could be activated and used.

You know I want to hear from you. What do you do to ensure that your identity stays protected? Comment below and let me know.

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9 Way’s To Raise Your Credit Score

9 way's to raise your credit score

One of the things I feared when I filed my bankruptcy was that my credit would be shot forever. That was as far from the truth as the east is from the west. Whether you have filed a bankruptcy plan, debtors court plan or credit counseling plan or not, here are a few tips that can assist you with improving your credit score.

1.ORDER YOUR CREDIT REPORTS

First things first, order your credit report from the three credit bureaus: Experian, Trans Union and Equifax. Your credit report will contain a list of accounts that are hurting your credit score. You are entitled to a free credit report from each bureau once per year. To save time you can go to http://www.annualcreditreport.com and order all three for free. If you want to see your score there may be a charge to upgrade to include the score. You won’t know your credit score unless you order your credit report. You will need to have all three of them, because each report differently and you will need to see how your accounts are being reported on each one. Don’t just assume that each report contains the exact same information. Remember, you can’t improve your score if you don’t know exactly what you need to work on!

2. DISPUTE ANY ERRORS

Now that you have your credit reports review them for errors, such as, accounts that are closed but are still being reported as open, any erroneous accounts that may not belong to you, or anything that you know to be incorrect. Write the credit bureau or the creditor and have this information removed. THIS IS YOUR RIGHT!! Errors hurt your credit report more than you think. For example, payments that are reported inaccurately can bring your credit score down anywhere from 60-110 points.

3. REDUCE THE AMOUNT OF DEBT THAT YOU OWE

The amount of debt you are carrying makes up 30% of your credit score. You will need to start paying off your debts in order to improve your credit situation. Come up with a payment plan that will put most of your available budget for debt payments towards the highest interest credit card or account first, while paying the minimum on the remaining credit cards or accounts.

4. PAY BILLS ON TIME

I know that should go without saying, but I’m going to say it anyway. Paying your bills on time will only have a positive effect on your credit score. As a matter of fact, paying your bills on time is one of the biggest contributing factors to your credit score. Write down all of your bills and their due dates. Keep them posted where you can see them and make sure that you paying on or before the due date.

5. AVOID NEW CREDIT APPLICATIONS

Since you are in credit repair mode, you should avoid making new applications for credit since some inquiries hurt your credit score.  New accounts can hurt your credit score as they lower your average credit age.  So stick with the accounts you have and work to improve their standing.

6. ALWAYS PAY SOMETHING

Make every effort to keep your account’s in good standing. This may mean that you have to make a partial payment one month, but that is better than not making a payment at all.

7. DON’T BE AFRAID OF CREDIT CARD’S

Being credit poor, in other word’s, having no credit at all, is just as bad or worse than poor credit. The best thing to do is to have one or two card account’s open and payoff what y0u charge each month. This is how you will build an excellent credit score without having to owe anyone anything.

8. KNOW YOUR LIMIT’S

Know exactly what your spending limit’s are on each account. This keeps you from going over the limit. Going over your limit will lower your credit score and you will incur over-limit fee’s as well.

9. BREAK OUT AN OLD CARD EVERY NOW AND THEN

Old dormant account’s, in good standing, can help your score. So pull out that old card an use it at least 2-3 times a year.

For 10 ADDITIONAL way’s to raise your credit score, click the image below for a free printout.

9 way's to raise your credit score
Click The Image For FREE Printable

 

Be patient and persistent during this process. You didn’t ruin your credit overnight and you can’t repair it overnight. Continue to make your payments on time each month and watch your credit score improve over time.

Your Money Make-Up Artist,

Tracie

Helping YOU Contour your pocket’s, Lift your bottom line and Highlight your future

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Types Of Credit Inquiries And How They Affect Your Score

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https:::flic.kr:p:iPHpBT/flckrcommons

For the past few weeks we have been talking about credit, the ins and outs of it all. This is our last installment in the credit series. I hope that it has been informative and has given you a basic but thorough understanding of how credit works and how you can be diligent in maintaining your optimal score.

I know that you have heard about creditors checking your credit and how it can possibly lower your score. There are two different types of credit inquiries, soft inquiries and hard inquiries. I will explain both in just a moment. An inquiry is posted to your credit report every time an individual or a business reviews or obtains a copy of your credit report, but a potential lender only sees the hard inquiries. As we learned in the early part of this series, 10% of your credit score considers the numbers of inquiries made to your credit report. So it just makes sense to limit the number of times that your credit report is pulled.

The Fair Credit Reporting Act (FCRA) requires businesses to have a legitimate reason for accessing your credit report. Acceptable reasons include: to grant credit, collect a debt, underwrite insurance, employment, license issuing by some government agencies and legitimate business transactions. If a company obtains your credit report under false pretenses or uses it improperly this is considered a violation of federal law.

Not all inquiries that appear on your credit report affect your credit score. Inquiries that are made because of an application you made for credit are the ones that affect your score. These are the ones that are called the hard inquiries. A soft inquiry is when a company pulls your credit to send you a promotional offer. We all receive offers in the mail telling us that we have been pre-approved for a car, credit card or furniture. Those are soft inquiries and lenders do not see them when they pull your credit; only you are privy to those pulls. Soft inquiries are also the inquiries made by employers, businesses you already do business with and you yourself.

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https:::flic.kr:p:iPBxsz

Inquiries on your credit report can indicate your risk as a borrower. Too many inquiries might mean that you are taking on too much debt or that you’re in some kind of financial trouble and are looking for credit to help you out. Several inquiries can reduce your score. Depending on how much information you have on your credit report, an additional inquiry may not affect your score. On the other hand, if you have a short credit history without a lot of accounts, an additional inquiry could cause your score to drop by a few points.

Credit report inquiries will remain on your credit report for 2 years, but only those made in the last year are included in your credit score calculation. The most recent inquiries have the most effect on your score.

When you are shopping around for mortgage and auto loans, it is understandable that you want to obtain the best rate and you should. Don’t worry that having your credit checked by several lenders could hurt your score, because most credit scoring calculations treat all mortgage and auto inquiries as a single inquiry, as long as the inquiries are made within a 45 day period.

If you have any further questions pertaining to credit, feel free to comment below or contact me personally. Thanks for reading!

 

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Alternative Credit– What It Is And How It Is Used

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https:::flic.kr:p:riEw6y/flckrcommons

Today we’re going to continue with our special serious on credit. Now that we have covered your credit report and credit scores, I am going to tell you about a form of credit that you may not have heard of. It’s called alternative credit and it is actually what I used to purchase my first home. I admit I had never heard of it until my mortgage broker brought it up. I was a couple of years out of bankruptcy and had made remarkable improvement to my credit score, but the lenders wanted to see more from me. I can honestly say had it not been for alternative credit I would not have been able to purchase a house.

Alternative credit is an option available to borrowers with little to no credit history. Alternative credit is usually in the form of a letter from the credit company that holds the account that does not normally report to the credit bureau. Examples of alternative credit are cellphone accounts, cable television accounts, automobile insurance and even cancelled rent checks, however, they all need to be paid on time in the last 12-24 months. I know what you are thinking: Don’t these accounts already report to the major credit bureaus? Yes they do, in the form of collection accounts when you owe them money. They rarely report when you pay on time and they are not obligated to do so. Reporting credit and payment information is totally a voluntary option, however, just because it is not reported does not mean it is not valuable or useful.

Alternative credit is an excellent way for someone with very little established good credit to prove their creditworthiness to lenders. It’s all about building a case for yourself to the lender. This form of credit is also good for foreign nationals as they may have not been in the United States long enough to establish a credit history.

Banks make a distinction between loan applicants with no credit history and those with bad credit history. Non-prime lenders are usually the only source of mortgage financing for borrowers with bad credit profiles, whereas homebuyers with little or no consumer credit history can often obtain home loans with alternative credit features from banks.

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https:::flic.kr:p:aFBdbv/flckrcommons

Another example of a borrower who may need to use alternative credit would be someone who has filed a bankruptcy and never re-established any credit accounts. Sometimes after a bankruptcy people feel it is better to pay cash for everything and not get any more credit accounts. I know that is exactly how I felt. This is not true because it is important to re-establish your credit after the bankruptcy.

Some examples of Alternative credit are:

Housing: Rent, lease or mortgage

  1. Utilities: Electric, gas, water, phone (mobile or land), cable, internet service.
  2. Revolving accounts: Bank secured credit cards, unsecured payday loans
  3. Installment Accounts: Vehicles purchased from a buy here pay here lot, all insurance types with the exception of payroll deduction, leased furniture, appliances or durable goods, layaway payments made monthly, condominium/homeowner association dues, timeshare maintenance, gym and physical therapy payment plans, child and daycare with regularly scheduled payments, parking with regularly schedule payments, self-storage, subscriptions and memberships with regularly scheduled payments.

So you see you can build your alternative credit profile with a wide variety of payments.

Given today’s economic climate, there is increasing support for the use of alternative credit. There are many Americans who don’t have enough traditional credit history with three major credit bureaus to obtain a credit score. This group includes young adults, such as my 22-year-old son with little to no access to traditional credit. I have built a profile for him using his cellphone bill, his rental history as he just obtained his first apartment this year, and his gym membership. He is well on his way to establishing his credit. Other individuals that you may know who could benefit from this are recently divorced or widowed individuals with little to no credit in their own names, newly arrived immigrants, individuals with previous bankruptcies, and individuals who consciously shun the traditional banking system.

The system that I used to build my son’s account is PRBC. You must become a member and it is free to do so. All you have to do is register at least 3 monthly-billed accounts and be sure to pay them on time. This is not a sponsored post but feel free to go to their website https://www.prbc.com for more information.

Thank you for hanging in there with me for this credit series. There is one more installment to come. Please feel free to share this information with anyone you know that it will benefit.

 

 

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Your Credit Score And How It’s Calculated Part II

Photo Credit Property Guiding Flickr Commons
Photo Credit Property Guiding Flickr Commons

Welcome back to our series on credit. Last week we talked about what your credit is and I gave you some basic, but important, definitions about credit. This week we will delve a tad bit deeper and discuss how your credit score is calculated.

Your credit score, or FICO score, is a computer generated summary calculated at the time of the request and is based on information a credit bureau or lender has on file for you, and is based on data about your credit history and payment patterns. Your score is calculated by both the positive and negative information on your credit report. The data is grouped into five different categories: amounts owed = 30%, payment history = 35%, new credit=10%, length of credit history=15% and types of credit in use=10%.  These percentages are based on the importance of the five categories for the general population.

Late payments will lower your score, but establishing or re-establishing a good track record of making timely payments will raise your score. Let’s breakdown these percentages a little more so you will understand why it is important to stay on top of your credit.

PAYMENT HISTORY 35%: The first thing any lender wants to know is whether you have paid past creditors on time. Now you see why it is the largest percent of your credit. A few late payments are not an automatic score killer. An overall good credit history can outweigh one or two instances of late payments. On the reverse end of this, having no late payments does not mean that you will have a perfect score. Remember, your payment history is just one piece of information used to calculate your credit score. Had I have known this years ago, I would have made more of a concerted effort not to overextend my credit and to pay my bills in a timely manner.

AMOUNTS OWED 30%:  Having credit accounts and owing money on them does not necessarily mean you are a high risk borrower with a low score. However, when a high percentage of your available credit has been used, this can indicate that you are overextended, and are more likely to make late or miss payments. This was exactly what happened to me. I was overextended and my payments were late and some weren’t made at all.

LENGTH OF CREDIT HISTORY 15%: In general, a longer credit history will increase your credit score. However, even if you haven’t been using credit that long, you may have a high credit score depending on how the rest of your credit report looks. Your credit score takes into account: how long your credit accounts have been established, including the age of your oldest and newest account and an average age of all your accounts; how long specific credit accounts have been established; and how long it has been since you used certain accounts. Today I can say that my credit history from the low point in my life has not repeated itself, thank God!

NEW ACCOUNTS 10%: Research shows that opening several credit accounts in a short period of time represents a greater risk especially if you don’t have a long credit history. If you have been managing credit for a short period of time, don’t open a lot of accounts too rapidly. Newer accounts will lower your average account age, which will have a larger effect on your credit score if you don’t have a lot of other credit information. Now don’t think that if you have a long credit history that opening a new account can’t affect your score because it can. Even if you have used credit for a long time, opening a new credit account can still lower your score. Opening a new account will likely produce a credit inquiry on your credit report. The new inquiry may have no effect at all, or it may make your scores go down slightly, depending on the type of inquiry and the number of inquiries already present on your report. For example, applying for credit excessively can almost be expected to have a negative impact on your scores, as most inquiries tend to indicate a higher credit risk. So be careful when applying for credit. When I was going through my ordeal I had every credit card known to man. Today I have 2 cards and one store account. I maintain those accounts to keep my score high. I use them sensibly and I don’t shop around for new credit.

TYPES OF CREDIT IN USE 10%: Types of accounts such as credit cards, retail accounts, installment loans, finance accounts and mortgage loans will be considered when tabulating your credit score, however it is not mandatory that you have one of each and it’s not a good idea to open credit accounts that you have no intention of using. The open accounts that I maintain on my credit report are two credit cards, which are considered revolving accounts, and an installment account, which is a small furniture account. These are accounts that I have had over 10 years (excluding the furniture account) and maintain a good payment history. Accounts that are included on my credit report that show paid in full are three automobile loans, a mortgage loan and my student loans. This mix of accounts, their age and my payment history on them made it a cinch to obtain financing on a new property my husband and I just acquired. So as you can see being credit conscious plays a major role in aiding you to live the lifestyle you desire.

Join me next week as we explore ways that you can clean up your credit.

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Your Credit Score and How It’s Calculated: Part 1

Excellent Credit Score
Excellent Credit Score

 

Do you know your credit score? Do you really understand what your credit score means? There was a time when I would have answered “No” to both of these questions. And today I know that many of the money mistakes I made in the past would have been avoided had I really understood credit.

I want to help you avoid those mistakes and so over the next several weeks I’ll be doing a series on credit. Today we’ll start with some basic, but important definitions:

CREDIT SCORE: Your credit score is a statistically derived numeric expression of your creditworthiness. It is used by lenders to assess the likelihood that you will repay your debts. Your credit score is based on your past credit history. It is a number between 300 and 850, the higher number the more credit worthy you are deemed to be.

Once I did learn my credit score it was 420, which, in case you were wondering, is awful! But I’m proud to say that today my score is 740!

CREDIT BUREAU: An agency that researches and collects individual credit information from banks, public records, and other sources and provides it for a fee to creditors so they can make a decision on granting loans.

Trust me the credit bureau was telling creditors to run from me as quickly as possible back then, but today I am a creditor’s dream!

CREDIT REPORT: A detailed report of your credit history, prepared by a credit bureau. Your credit report includes personal data, a credit score, a summary of credit history and detailed account information.

Once upon a time my credit report was so jacked it wasn’t even worth the paper used to print it.

CREDIT HISTORY: A record of your demonstrated responsibility in repaying debts. It consists of information such as: number and types of credit accounts, how long each account has been open, amounts owed, whether bills are paid on time and number of recent credit inquiries. It also contains information regarding whether you have any bankruptcies, liens, judgements or collections. This information is contained on your consumer credit report.

Let’s just say I am glad that I have rewritten history in terms of my credit.

CREDITWORTHY: The measure of your ability to repay debt.

My creditworthiness at one point was no ability to repay debt, but today I am debt free!

Ok, now that we have the basic definitions out of the way, join me next week for part 2 where I will explain how your credit score is tabulated. We will delve into the different data used and the five categories that make up your score. Lord knows back in the day my data was a hot mess, but today I have credit offers on a daily basis!

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5 Ways to Improve Your Credit Score

Image by www.gotcredit.com via Flickr/CC
Image by http://www.gotcredit.com via Flickr/CC

One of the things I feared when I filed my bankruptcy was that my credit would be shot forever. That was as far from the truth as the east is from the west. Whether you have filed a bankruptcy plan, debtors court plan or credit counseling plan or not, here are a few tips that can assist you with improving your credit score.

  1. ORDER YOUR CREDIT REPORTS

First things first, order your credit report from the three credit bureaus: Experian, Trans Union and Equifax. Your credit report will contain a list of accounts that are hurting your credit score. You are entitled to a free credit report from each bureau once per year. To save time you can go to http://www.annualcreditreport.com and order all three for free. If you want to see your score there may be a charge to upgrade to include the score. You won’t know your credit score unless you order your credit report. You will need to have all three of them, because each report differently and you will need to see how your accounts are being reported on each one. Don’t just assume that each report contains the exact same information. Remember, you can’t improve your score if you don’t know exactly what you need to work on!

  1. DISPUTE ANY ERRORS

Now that you have your credit reports review them for errors, such as, accounts that are closed but are still being reported as open, any erroneous accounts that may not belong to you, or anything that you know to be incorrect. Write the credit bureau or the creditor and have this information removed. THIS IS YOUR RIGHT!! Errors hurt your credit report more than you think. For example, payments that are reported inaccurately can bring your credit score down anywhere from 60-110 points.

  1. REDUCE THE AMOUNT OF DEBT THAT YOU OWE

The amount of debt you are carrying makes up 30% of your credit score. You will need to start paying off your debts in order to improve your credit situation. Come up with a payment plan that will put most of your available budget for debt payments towards the highest interest credit card or account first, while paying the minimum on the remaining credit cards or accounts.

  1. PAY BILLS ON TIME

I know that should go without saying, but I’m going to say it anyway. Paying your bills on time will only have a positive effect on your credit score. As a matter of fact, paying your bills on time is one of the biggest contributing factors to your credit score. Write down all of your bills and their due dates. Keep them posted where you can see them and make sure that you paying on or before the due date.

  1. AVOID NEW CREDIT APPLICATIONS

Since you are in credit repair mode, you should avoid making new applications for credit since some inquiries hurt your credit score.  New accounts can hurt your credit score as they lower your average credit age.  So stick with the accounts you have and work to improve their standing.

 

Be patient and persistent during this process. You didn’t ruin your credit overnight and you can’t repair it overnight. Continue to make your payments on time each month and watch your credit score improve over time.

 

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