Good Credit Is Becoming A Necessity In This Economy

Copyright (c) 2011 John Gough Rasor

I will never suggest that someone buy something on credit that they can't afford. That's how people get into major financial trouble. But simply ignoring your credit can cost you hundreds of thousands of dollars over a lifetime.

The credit requirements for "major purchase" loans (cars, mortgages) are becoming stricter every day, so it's important to establish a solid credit history with smaller accounts like credit cards. But make sure you avoid making these mistakes:

* Applying for too many charge cards, or credit that you don't need.

Too many inquiries inquiries can lower your fico score. If you have been denied for credit more than once or twice, a secured card may be your only option. But they will build your credit history much quicker than finance and other high interest credit accounts because the credit bureaus view major credit cards as more "legitimate" forms of credit. - Charging the balance of any card over 50% of the credit limit. Once a balance goes over 50%, the credit bureaus tend to deduct points because they feel you may be a higher credit risk. Try to ALWAYS keep the balance below 50% of the limit, even if you plan to pay off the balance at the end of the month. Credit card companies don't always report the lowest balance. They usually report the balance at the end of the billing cycle, which is when it's usually at the highest.

* Scams to increase your credit score in a short amount of time.

Many credit repair companies promise drastic score improvements that simply aren't possible in most cases. Avoid credit repair companies that "guarantee" your credit score will increase by a certain number of points. A good credit history is something that takes time to develop, and you have to rebuild your credit history in order to do this. Simply removing old collections will not mean anything if you aren't also reestablishing credit at the same time. It's impossible to remove items from your credit report that are true and accurate. In fact, it's a crime to knowingly dispute information that you know is accurate and the credit bureaus may ignore a credit dispute if they determine your claim to be "frivolous".

Once again, I strongly recommend building your credit history with a secured credit card. Opening a new credit card may initially lower your credit score, but once a payment history begins to develop, the score will increase over time.


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