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Your Credit – Five things to be Aware of!

There are several resources available to improve your credit score.  Some of the information is valid while others provide outdated information that is no longer beneficial.  Below, you will find several tips that everyone should know:

#1 – You are entitled to one free credit report each year

You can obtain this report at: www.annualcreditreport.com. Make sure that you obtain information from the three major credit bureaus: Equifax, TransUnion and Experian.  

Reviewing your credit report periodically is recommended since your credit profile is pivotal in obtaining loans, opening insurance policies and even some cases securing employment.

#2 – “That’s not mine” but…

While reviewing your credit report you may notice that there is an account or two that isn’t familiar to you. Before you place an inquiry about any account like this, review it. It is possible that removing such an account could lower your credit score. I know that seems silly, but it is very possible.

Think about this, if there is an account showing on your credit report that has been opened for four or five-year and is reporting negatively due to a 30-day late payment three years ago, removing such an account will more than likely lower your credit score. Seek the advice of a professional to evaluate unique situations like this.

#3 – Keep the line open

One of the largest mistakes that people make is closing credit lines. I understand if there is a student loan or auto payment account that is completely paid that the lender will report the account as closed. There is little one can do about that. But the revolving account (credit card) should never be closed even after the balance is zero. Doing this can ruin your credit score.

If you have a revolving line of credit that has a zero balance that you rarely use, do not close it.  Here is why:

One of the elements of your credit score weighs something called your credit utilization ratio. The credit utilization ratio is calculated by adding the total amount of credit used and dividing it by the total amount of credit available to you. The higher the ratio, the more your credit score will be negatively affected.

#4 – A phone call can save your credit score

If you run into a cash flow crunch and think you may be late making a payment, call your creditors. There is a possibility that a payment extension can be worked out so that your account isn’t reported to the credit bureaus as late. Obviously you can’t use this approach every month, but on the rare occasion that something like this may occur, make the phone call.

Remember a 30-day late reported on your credit could drop your score significantly and will take several months of making payments on time to recover. One phone call could avoid several months of work. Make the call!

#5 – Seek the help of a professional!

When I purchased my first car I was told that the oil needed be changed every three months or so. I had this seemingly logical idea—why would I pay someone to change the oil? It would be less expensive to change it on my own. Once I learned what had to be done and what could go wrong if I did something wrong, my perspective quickly changed! I looked for professionals who knew what they were doing.

This works the same way with your credit. Of course you can do it on your own. Besides, you have Google, the Internet, books, blogs, newsletters, YouTube videos, etc. which contain a plethora of information—obviously you can read and have the time to navigate these resources. But what happens if you do something wrong? A good friend’s words ring true here, “If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur!” Or try to do it yourself!

 

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About Frederick Towles

Frederick Towles is an entrepreneur, author and professional coach on personal finance, recognizing, seizing and leveraging opportunities of all kinds. Frederick founded The Towles Group Inc. to address issues that relate to small businesses and individuals – accounting, taxation, asset protection, financial compliance, wealth creation, debt management and business management. He also founded Unlimited Expectations Inc. which provides tools for individuals to assist them in the areas of opportunity recognition, leadership and personal finance. Through the tools and services offered by these companies people are positioned to operate their lives and their businesses at optimal capacity.

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