Understanding Credit: Part II

Credit Ups and Downs

In our last blog post,

Understanding Credit: Part I

, we talked about the defenition of credit and what it means to have a good or bad credit score.  Unlike golf, having a low credit score is NOT a good thing!  Low credit can cause some major roadblocks in life.  I’m not just talking about apply for credit cards and auto loans either.  Many students could never be able to afford college if it wasn’t for student loans, but did you know that low credit could be the reason why you are denied a student loan!  For some of us, no student loans mean no college!

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While we can probably all agree that low credit is NOT a good thing, one advantage we have as young adults is we don’t have a long history of bad credit working against us.  We have a somewhat fresh slate to work off of. That’s why it is important now more than ever we start making smart decisions that improve and maintain a good credit score.  So how do you get there?  How do you build a good score or improve a bad one?  No matter what your score might be right now, you can work to make it better.  The most important steps you can take now are…

Check it out

  1. Pay your bills on time—even if it’s just the minimum amount due.
  2. Hang on to old credit accounts (they don’t need to be active—they contribute to your history).
  3. Review your credit report and contact the appropriate credit bureau to fix any errors.
  4. Reduce your credit card balance as soon as you can to less than 75% of the balance. (25% is preferred.)
  5. Be careful who you authorize to review your credit report. Read applications carefully to understand what your signature is authorizing. (You can check your own report with no effect.)
  6. Don’t open any new credit accounts prior to a large purchase such as a mortgage.

The last thing to remember is that your credit score is not permanent.  Even if you have a low score now, you can fix it!  Yes it will take some time, but by following these steps you can turn it around.  Get yourself into a routine now and you’ll have a much easier time resisting temptation in the future!

Until next time,

Austin