Good Credit 101

There are a lot of things that affect your credit score and I won't pretend to know everything that does and how those things change your score. I can list a few things to keep in mind when considering the various things we consider in our life.

1. The more your credit is pulled by companies, the lower your score will be. If you pull your credit as you, which I would recommend once a year just so you know where you stand, it won't affect your score. A company pulling your credit to evaluate you for employment has a small impact. A company pulling your credit to evaluate you for a credit card, mortgage, financing, or a big purchase will have a larger impact.

What does this mean? Keep the number of credit cards you have to as few as possible. I have 2. I might go to 3 for American Express when I start to travel more. Do in-store financing as little as possible. (I'll expand on this issue in another post) Check out mortgage rates and companies before approaching them so you don't end up shopping for a mortgage and having each company pull your credit lower and lower.

2. Pay your bills. And I mean all of them. $2 late fee for a book at the library? They're starting to send those little items out to collection agencies and that means they show up on your credit report. Pay the big ones too. Especially your mortgage. With the number of mortgage fraud cases going up(which I'll expand on in another post) lenders are getting more efficient at their foreclosure processes. A trip to Tahiti for two weeks is not worth losing your home. And, maybe most importantly, PAY YOUR CREDIT CARD BILLS! Even if you can't afford to pay the whole amount(which is a big issue I will expand on in a Credit Cards 101 post) pay as much as you can, NEVER EVER pay just the minimum amount.

3. Pay on time. Late may be better than never, but now is better than later. Don't wait until the last second to mail your check in. Have your check in the mail at least a week before the due date listed. Remember, the postal system takes time. If you can have bill payment automated at no charge, do so. I have Discover, it is my primary card because of the cash back feature. Every bill that I can have charged to my Discover card automatically, I do. Because the automation is handled by the company billing me, the amount taken is always enough and it's always taken on time. Not paying your electrical company for a couple months doesn't just shut off your electricity, it'll probably end up on your credit report.

4. Don't max out your credit limits. This includes Home Equity Lines of Credit(HELOC) as well as credit cards. Stock accounts have margin accounts and those are included too, although for slightly different reasons that I won't cover here. Most credit reports have a 3 line summary of issues with your credit under each credit agency's score. One of them is often "amount of balances relative to credit limits too high" or something similar. If the rest of your credit is fine, this is pretty meaningless, but if your credit is shaky, this is seen as an indicator of poor ability to manage bills.

Remember, your credit score affects many things. Your ability to get a job, a car, a home, a celphone. The lower your score, the harder and more expensive it will be to get these things. So, do what you need to do keep your score up. You may find other parts of your financial life falling into place.