Top 10 Tips to Better Credit

Top 10 Tips to Better Credit

By Charissa Potts, Attorney at Freedom Law, PC
www.FeedomLawPC.com

You need to know how to work the system.

Right or wrong, your credit will determine your future. A strong credit score will allow you to live the lifestyle you want and build wealth and security. The good news is anyone can build or improve his or her credit! You don’t have to be rich or have a lot of education. You just need to know the rules. If you follow the rules, then you get a better score.

Here are my top 10 tips to better credit:

1.    Get a credit card. I know, this seems dangerous. But this is probably the most important first step. You may only be able to get a secured credit card, and that is ok. You want to make one small purchase on this card each month and pay it off in full. Your small purchase can be a tube of toothpaste or a trip to the gas station, but you must pay it off in full every month.  I recommend eventually getting at least 5 credit cards and doing the same thing on each card every month – one small purchase, pay off in full. Never carry a balance from one month to the next.

2.    Never miss a payment. When the mail comes in, it may be tempting to set a bill aside and tell yourself you’ll think about it later. But missing even a single payment can have an impact on your credit score. Set an alarm on your phone to make sure your bills are paid on time. Pay the entire balance, or pay as much as you are able.

3.    Open a bank account. Consider going to a credit union or a local bank to set up a new service. If you are concerned about overdraft fees, then open a bank account for savings but use a pre-paid debit for day-to-day purchases. This way you will have the benefit of a bank account and not run the risk of overdraft fees.

4.    Don’t close old credit card accounts. If you have a credit card that has been in your wallet for a decade or more, that’s actually great when it comes to building your credit history. Keep those cards open whenever possible.

5.    Dispute errors on credit report. Errors are common on credit-bureau reports. Names can be confused or you may have gotten dinged for a late payment that wasn’t the case. If you can fix these mistakes, it will raise your credit score.

6.     Check your credit report, and check it often.  This is easier and cheaper than ever, especially with apps available like Credit Karma, which everyone at my office uses (they do not pay me anything to say that!) Credit Karma is free, and you can check as often as you like to ensure there are no mistakes. I also love Credit Karma because my clients can keep track of their progress and watch their credit score increase over time!

7.   Create a budget. Pretty much everyone hates this word. But a budget doesn’t need to be complicated. Track where you’re spending for a month, and it will reveal much more about your habits than you may realize. Hammer down and keep what you’re spending from overflowing what’s coming in as income.

8.    Pay down your debts. This is easier said than done, of course. After your basic living expenses are paid every month, you should be able to put some money toward paying down your debts. Go one debt at a time, and pay it off completely. Then move on to the next debt. If your balances are not going down or if you don’t have any money left over after your expenses are paid, then you may need to look into other options to clearing up the debt.

9.     Avoid people who want to give you a “quick fix.” Some companies claim that they can repair your credit – for a fee. Other “debt consolidation” companies promise fixes that will take years and cost thousands of dollars. I often see people in my office that have tried many other things before coming to see me, and regret all the time and money wasted. There is no way for these firms to remove negative information from a credit report if it is correct. It takes time and good advice to fix issues.

10.  Consider bankruptcy. If you are unable to make progress on your debts, you should consider getting a fresh start. Bankruptcy is often the quickest way to repair credit. Once the slate is clean, you can actively rebuild right away. With diligence, your credit score can be in the mid-700s and higher within 18 months of filing. 

5 Reasons Good Credit is Essential

My mother never talked to me about the birds and the bees. When I was sixteen, she instead sat me down for a serious conversation about building solid credit. My mom is a practical woman. At the time of our conversation, she was already widowed and trying to support three children on her meager secretary’s salary. Good credit was especially important to her because we didn’t have much money.

Good credit may seem like a lofty goal or something that is out of reach. But, in reality, good credit is the basis of a simple, drama-free life. Good credit creates a balance that lets you achieve everyday goals and become the relaxed person you want to be.

It was important to my mom that I start building credit as early and as quickly as possible because she believed that it was essential for my future. Why should you care about having good credit? Here are some reasons.

·         Good credit means you won’t have to pay as much for a loan. You know you shouldn’t overpay your taxes because it’s like giving Uncle Sam free access to your money. The same goes for why you don’t want to pay a bank or lender more than they need. If you have bad credit, the bank or lender is justified in charging you more to ensure you don’t default. But coming into those loans with good credit means you will qualify for larger loan amount with more reasonable interest rates. You will pay less over time, which means you’ll have more money for your family and your interests.

·         Good credit means you can live where you want and how you want. Lenders, such as those who offer mortgages, as well as landlords look at credit history. This is how they judge whether you are eligible to use their services or live in their properties. If you want to have the lifestyle you deserve, you need to have good credit across the board. If you aspire to provide for your family in a way that meets your personal standards, then you need to think about how you can protect and maintain your credit over the long term.

·         Good credit saves you money. This is obvious, but many don’t realize how much money good credit can save you. People with good credit pay less for loans on mortgages and vehicles, but also have lower interest rates on every other type of loan, including credit cards and student loans. Good credit will even save you money on auto insurance!

·         Good credit means you can take care of any emergency. To truly feel like you’ve got a handle on your life, you need to think about how you would respond if the roof sprung a leak or if you got into a significant car accident. If these kinds of emergencies would completely derail your progress as a person or your family’s comfort, then you need better credit. Having good credit means you could apply for a loan or tap into existing financial options, such as a line of credit, when unexpected events occur. There is no greater feeling than knowing you can rely on yourself or your own finances if the worst happens. Good credit is like the ultimate parachute, allowing you to land softly in any circumstance.

·         Good credit can improve job prospects. More and more often, employers are checking your credit history. It is often part of the hiring process along with background checks and drug testing. Right or wrong, bad credit can disqualify you from certain jobs.

The bottom line is good credit gives you options. When you have good credit, everyone wants to do business with you because you’ve proven that you are responsible and intend to pay it back. 


Charissa Potts,
Bankruptcy Attorney
www.FreedomLawPC.com