Ah, your creditors they are not your friend. They give you money but they charge you for using it. the interest rate and fees are based mostly on your credit scores and credit history. How does a potential creditor know your credit scores and history? They get these things from a credit reporting agency. Makes sense doesn highest possible credit score ‘t it? But, is this all there is to know when it comes to your credit and improving your scores? What I’ll cover in this article could impact your pocket book forever.
First, here is a little history to read.
They are not your friends. As reported in the documentary film “Maxed Out” the credit reporting agencies are paid by creditors to report your credit history. Additionally, the reporting agencies do not have a huge incentive to make sure that your credit report is correct given they are paid by your creditors to report your information. They do have an obligation to you to fix something that is incorrect on your credit report, but you have to question it first.
They make it easy to get credit, and then “make” you keep it. If you look at what has happened in the US over the last 15 years, more and more people got credit cards. At the same time, personal bankruptcies skyrocketed. Credit card companies were making money hand over fist, but as personal bankruptcies started going up things started to change. Credit card companies started getting squeezed and they didn’t like it. They didn’t like it so much that according to the documentary film “Maxed Out” it was MBNA, a credit card company, who pushed the new bankruptcy law through Congress in 2005. This law made it harder than ever to file a personal bankruptcy.
Second, with this history in mind, let’s look at some things that you can do to impact your credit scores and credit history that the credit card companies and reporting agencies won’t tell you.
There are consequences to having certain kinds of credit cards. You should consider what type of credit card to get. Even though the 10% instant discount is enticing, don’t get department store credit cards. In general they are looked at unfavorably in your credit report by lenders because these cards are given to just about anyone with a social security number. You don’t need to have good or any credit to get them. Get a couple of Visas or Mastercards from Bank of America, Citibank, Wells Fargo, and/or Discover. These cards will go a long way to helping you establish credit, improve your credit scores and ratings. Make sure you use these cards carefully and pay them off every month. Don’t have more than 3-4 of these cards.
Opt out of credit card offers. Not only will you be saving a tree but your credit score might go up just by opting out of receiving the credit offerings. Go to and fill out the information. You should be dropped from a majority of mailing lists within 2-3 months.
Get a prepaid debit card. What’s great about this credit solution is that you have to have the money in the bank to use with your card so you can only buy what you can afford. Also, most prepaid debit cards do report to the credit reporting agencies so your credit score will be a lot happier if you make your payments on time. You can also use this account to set up payments for your utilities, cable, phone, and internet access etc.
Do not cancel your old credit cards. A portion of your credit score is based on your credit history. When you cancel a card, your credit history goes with it. It shouldn’t cost you anything to keep it anyway. If you don’t like the idea of having it, just tear up the old card. If the credit card company tries to charge you an annual fee, just tell them you want to cancel it. Most likely they will just waive it.
Keep your credit card balances low. Just because you have a credit card doesn’t mean that you have to use it or have it maxed out. As a rule of thumb you don’t want to go over 30% of the available credit limit and at the absolute max, 50%. So if you have a card that has a $10,000 limit, at the most you would not want to have more than $5000 charged on the card. Once you go over this limit, your score will start to be impacted negatively.
Limit your credit inquiries. Don’t run around town and let every department stores or car dealer run your credit. Nothing wrong with having it pulled here and there. If you have it pulled to many times in a short amount of time it will drop your score like a rock. I’ve seen it as much as 80 points in a 30 day period.
I have given you a lot of things to think about. Some of these suggestions will work better for one person’s credit report than another. It all depends on your unique situation. What I have presented are some general tips for improving your credit scores and report which will lead you to better interest rates and loan programs. My best advice, if it doesn’t feel right don’t do buy it.