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Monitoring and Improving Your Credit

When it comes to your credit, what you don’t know can hurt you. Your personal credit reflects on your good name – and it matters. A good credit score is critically important if you ever plan to apply for a credit card, mortgage, auto loan or any other type of credit. When you have a good credit score, you get better terms and interest rates. The first step to good credit health is to check your current credit status. There are many free online resources to check your credit report, but be sure to do some research and check reviews to make sure you are using a reputable service. The Fair Credit Reporting Act (FCRA), enforced by the Federal Trade Commission, requires each of the three credit reporting agencies – Experian, TransUnion and Equifax – to provide a free copy of your credit report, at your request, every 12 months. Visit annualcreditreport.com to get your copy.

If you think your financial information has been compromised for some reason, keep a close watch on your credit to make sure someone isn’t opening new accounts in your name.

Once you understand the current state of your credit file, you can get to work on improving your score. Just know that there is no magic formula to immediately boost your score. In general, low credit scores are the result of too much credit card debt and/or negative information caused by poor credit management. If you have the cash to pay down large credit card balances, do it. This can quickly have an impact on your credit score. As for the credit management part, this will take more time.

Your credit report takes into account years of history, so it can’t be improved overnight, but here are a few tips that will get things headed in the right direction:

  • Reduce the number of credit cards you use and pay off the ones with small balances.
  • Good debt (i.e., debt that has been paid) is good for your score. Don’t request that old accounts be removed from your report just because they have been paid off.
  • Avoid excessive “hits” to your credit report. If you are shopping for a mortgage or car loan, make sure the inquiries are made within 14 to 45 days of each other. This way, it counts as one inquiry. Each time you apply for a credit account, it can cause a drop in your score that can last up to a year.
  • Pay your bills on time, every time. Good, consistent bill payment history is the foundation of a solid credit score.

When you are trying to raise your credit score, be patient. Continue to watch your accounts and practice good credit management habits and you will reap the benefits of an improved score.