Important credit rating and report tips

For those people that are having financial difficulties, knowing more about credit reports and credit ratings can be very important.

Jeffrey H. Massey, a Certified Financial Planner™ Professional, joined The Rhode Show with some information about credit reports and ratings.

Credit scores are very important to lenders. They use it in order to determine whether or not they should lend money.

"Your credit score will determine whether or not you get the loan, but, also the interest rate and terms of the credit. The lower your score, the less likely you will be approved for loans. If you are approved, with a lower credit score, you may have to pay a higher interest rate," said Massey.

Your credit score is broken down into five categories:
Payment History – 35%
Total Amounts Owed – 30%
Length of Credit History – 15%
New Credit – 10%
Type of Credit in Use – 10%

And based on that information, keeping your payments up must be real important.

• "Making your payments on time is the single most important thing you can do to keep your score high, or improve upon your score. Payment history is the largest factor that is used to determine your credit score. Payments that are 30 days or more past due will show up on your credit report and negatively impact your score. These negative marks generally stay on your report for seven years."

There are also other important factors when trying to improve your credit score.

• "Keep your total debt load under control. It’s the second largest factor of your credit score. If l you currently have a significant amount of outstanding debt, your priority should be to stop borrowing and work toward lowering the balance."

This isn’t always easy, but the only way to improve your debt situation is to stop borrowing or using credit cards and continue to make timely payments that reduce your balance. In addition, you want to consider how much of your available credit is utilized. For example, if you have many credit cards that are maxed out, or very close to their limits, it will negatively impact your score. Two credit cards with a $5,000 limit and a $1,000 balance on each will look much better than a single card with a $2,500 limit and a $2,000 balance.

Keep Old Accounts Open. The length of your credit history is another important credit score factor, so it can be to your advantage to keep older accounts in good standing open.

*While you want to keep the total number of accounts manageable, sometimes it can hurt your score more to close an old account than to keep it open, even if that means you have more open accounts.

Be Careful When Opening New Accounts. While new credit is the least important factor in your score, it is still an important issue to consider. When you are shopping for a new loan or credit card, do your shopping in a relatively short amount of time. You don’t want to have your report show that you are constantly looking for credit.

Online:

www.annualcreditreport.com
Provides a yearly free credit report from Equifax, Experian, and TransUnion, in order to monitor credit history and guard against identity theft.

www.creditinfocenter.com/
Offers debt consolidation counseling services and free credit reports.

www.bankrate.com
Provides rates for mortgages, consumer loans, savings accounts, and credit cards.