Financial Experts Reveal the Secret in Managing Your Credit Score
Everyone knows you must have a good credit score to avail of a new home or car in America. Having a bad credit score can get your applications denied in a heartbeat. But is having a credit card debt a good solution to improve your credit score? The financial analysts don’t think so. In fact, they recommend you avoid having a credit card debt.
Avoid Having a Credit Card Debt
The certified financial planner and public accountant John Vento advises his clients to only buy the things they can afford to avoid having any credit card debt. He adds that the safest mode of payment is still cash.
And in case your cash isn’t enough, then you shouldn’t buy it yet instead of resorting to credit card debt. Aside from that, he also recommends sticking to having two cards. While it’s tempting to sign up or purchase retail credit cards to get discounts and exclusive perks off your total purchase, Vento only recommends availing one if you’re buying in bulk or you have to spend a lot of money.
But if you’re only spending a little amount in buying your food and necessities, then you’re better off not having retail cards. If you’re in need of a credit card like when you’re refurbishing your entire apartment, you can avail of it to get a 25% discount according to Vento.
However, he recommends you settle the credit as soon as you receive the bill. In this way, not only are you beating the credit card lenders at their own game, but your interests rates are also not accumulating.
Why Is Your Credit Score Important?
Vento says your credit score acts like your financial report card. The higher credit score you have, the more lenders will be open to letting you borrow money. Also, the more chances of getting your home or loan application approved. Most of all, Vento says most people with high credit scores enjoy lower interest rates than those who do not.
Here are the other tips he recommends:
Leave Your Old Debts In Your Credit History
Some people believe having an old debt will affect their credit score badly, which isn’t necessarily the case according to Vento. Good debts like your home and car are good for your credit score as long as you’ve paid it off.
The longer you have a history of good debt, the more lenders will have confidence in letting you borrow a money. So if you have good old debts, it’s better to leave them be since it is a good reference to improve your credit score and record.
Use Your Calendar
Whether you’re shopping for a student, mortgage, home or car loan, it’s important to do your rate shopping in a short timeframe. The same principle also applies for credit card application. You need to time in your application since even the smallest move can cause a significant dip to your credit score. According to the most lenders, they ignore any shopping rate queries made within 30 days prior to your FICO scoring.
If you filed an application older than 30 days, the lenders would count all your queries as one within the shopping period. Vento also recommends you check the credit score you use as the length of shopping period varies. For example, those who are using the newest scoring software forms have 45 days shopping period, while those with older forms only have 14 days.
Don’t Hint at Risk
According to Dave Jones, a retired president on consumer credit counseling, you should not do anything that may put your credit score and financial stability at stake. For example, missing out your payments or due dates can scare your card issuer.
Other situations include getting your card involved in businesses that may hint future money stress like paying your divorce attorney’s fees or transacting with a pawnshop. These will give the lenders an indication that you’re undergoing something that may drain your finances.
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