How to Keep Your Credit History Clean
Being smack in the middle of an attempt to repair a credit report isn’t really a fun place to be. Fixing past credit problems takes time and dedication, and in some cases a complete change in how money is handled. This whole headache can be avoided by simply not allowing credit to spiral out of control in the first place.
There are lots of things that can harm a credit score. One of the most common negative items on credit reports are late payments. A person can have a squeaky-clean credit report and then miss one payment, and suddenly that credit report isn’t so squeaky clean anymore. Being thirty days late on a bill, no matter what the reason, will show up on a credit report and drop the credit score down a few points. The notation of the late payment, by the way, doesn’t disappear when the account is brought to current status. The history of that one late payment will haunt the credit report for years to come.
If so much fuss is caused by a single late payment it is easy to guess what multiple late payments will do. With every instance of a late payment, the credit score falls lower and lower. When a creditor looks at a credit report they can usually get a good feel for the person’s likelihood of staying current with payments. The creditor will probably brush off the instance above with the singular late payment if it’s the only instance in an otherwise perfect report. Many late payments, especially those occurring at different times, will send a red flag to the creditor that this particular consumer isn’t a safe bet. If creditors don’t see an applicant as a safe bet then the consumer will not be offered the best interest rates available.
It isn’t difficult to keep a credit report clean if you understand what items are seen as derogatory. Late payments are notated in varying degrees, depending upon the lateness of the payment. When a creditor looks at a credit report they can see if a bill was thirty days late or rather ninety days late…and there is a big difference. A single delinquency of thirty days suggests that the consumer simply forgot to pay the bill that month, but a few ninety-day delinquencies suggest a problem paying bills consistently. What is the moral of this story? Pay your bills on time, every single month. With all the bill-paying software available nowadays there really is no reason to allow forgetfulness to ruin your credit rating.
More is not necessarily better when it comes to credit lines. It is good to have a couple of open and active credit accounts to show prompt payment, but if a consumer has multiple credit cards open this puts up a red flag. Even if the cards have zero balances, the fact that there is available credit tips off the creditors that even though no money is owed on these balances right now, that may well change next week or the week after, affecting the consumer’s ability to pay. If all the credit cards are maxed out it is equally detrimental, if not more so. From a credit standpoint, it is best to carry only a couple of cards and to pay the balance off every month. If paying off the balance isn’t feasible, then prompt payments are a must.
One other item, which many consumers don’t realize is affecting their credit rating, is the number of inquiries on the report. Inquiries are notations at the end of the report, which list the creditors who have, by the request of the consumer, taken a look at the credit report. Every single time a person requests a line of credit, an inquiry is noted on the credit report. This list tells creditors a lot about the future spending habits of a customer. If the inquiry list is full of recent department store inquiries, a creditor may see this as a warning sign that the consumer is getting ready to rack up some major debt. So think twice before filling out an application for credit. Rest assured that almost every financial move you make is notated somewhere, and can come back to haunt you if not managed well.
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