Underground Journal

Maintain A Clean Credit Report To Lower Borrowing Costs

In today’s society, it’s nearly impossible to survive without credit.  Be it renting a car (just try it without a credit card), buying a home (there’s no such thing as a “sub-prime” mortgage these days), or even getting a job (yep, most employers check your credit), you can’t do much of anything without decent credit.  Good credit could mean the difference between getting a good rate on a car loan and not being able to get a loan at all!  Your credit is your good name, and without that, you have nothing.

Keeping Your Credit Report Clean

Your first move should be to obtain a copy of your annual credit report, including your credit report score, from one or all three of the major credit reporting agencies.  If your credit report is clean, it’s just a matter of avoiding any obvious mistakes that might hurt your credit score, including

• Limit your borrowing – Your credit usage ratio, that is, the ratio of your credit balances relative to your overall credit limit, factors heavily into your score.
• Pay all your bills on time – One missed payment can wreak havoc on your credit for up to seven years and undo all your hard work.

If your credit report isn’t so clean, you have work to do.  First, carefully inspect the negative items on your report to make sure they are legitimate:  a surprisingly high number of credit reports have serious errors.  If you find one, file a dispute with the credit agency and call the offending company to sort things out.  Never, ever admit to being in the wrong.

If your negative credit items are unfortunately all correct, it’s not too late to clean up your credit.  It takes time, but you can feasibly go from bad to above-average credit in just a year or two by religiously following these basic guidelines.

• Pay down debt aggressively – As stated above, the ratio of how much credit you’re using versus how much is available to you forms a significant part of your credit score.  Get a second job if you have to.
• Don’t close older accounts – This is where many people go wrong:  they pay off their debt and then close all their credit cards!  Since the average age of the accounts on your credit report is a factor (small but significant), it makes sense to keep older credit cards open even if you don’t use them.
• Stop digging – If your credit is shot, the last thing you want to do is dig yourself into an even deeper hole by continuing your spendthrift ways.  Cut your spending immediately and keep it there.

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