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Simple Ways to Help Your Credit Score

by Nancy Osborne, COO of ERATE®

Sep 5, 2007 - Due to recent calamities in the world of sub-prime lending, the topic is on everyone's mind today.  Is your credit score good, bad or average?  Do you even know?  Perhaps you are a member of the credit all-stars and have a score over 720.  Well whatever your score a few rules remain clear:  1) It is very important to know your credit score and to monitor it regularly.  2) You must do everything in your power to prevent damaging your credit score, protecting it as you would the family jewels.  3) Do all that you can to improve your score, particularly if there is room for improvement. 

Here are six simple steps, requiring minimal effort on your part, which can help improve your current credit standing:

• Exercise Your Credit Muscle – in order to have good credit you must first establish a credit history.  This can only be accomplished by opening new accounts and using them.  Monitor your credit usage so that it's not excessive and you are successfully paying off open balances.  Avoid putting yourself in the position of borrowing money you think you need but cannot comfortably repay. 

• Pay All Bills on Time – with the ripple effect that one late payment can have on the collective interest rates on all of your debts, it is vital that you make no mistakes, leave no room for error and always pay on time.  The worst offense is to be late for reasons other than economic, such as due to forgetfulness or oversight, as this will prove to be a costly mistake you may not easily overcome.  The impact to your credit score of having a single late payment could be as much as 75 points which may easily knock you from prime to non-prime virtually overnight.

• Maintain Low Balances on Your Accounts - this can be tricky because it will require careful monitoring and management on your part.  Many people may think it is better to have only one credit card and run it up and down each month.  However those in the know about the credit scoring model say that running a card up to its maximum limit can be hazardous to your score.  Better to have several cards and to never reach a balance exceeding 65% of the card's maximum limit.  It is perceived as a sign of trouble if you are running balances anywhere close to the max. 

• Open a Major Credit Card in Your Name – if you have not established your own credit and only have credit extended through a partner or spouse, you need to build your own credit profile.  Perhaps you have had credit problems in the past which prevented you from applying as a co-borrower or joint account holder with a partner or spouse.  It might be time to hit the re-fresh button on your own credit profile and begin a new.

• Add Your Name onto an Existing Account as a Joint Cardholder – complementing the advice given above, if your credit was tainted due to your own neglect and abuse, then perhaps you can start again by adding your name onto an existing account of a spouse or partner.  Of course you need to be honest about your prior credit history and seek express permission before doing so. 

• Apply for a Department Store, Gas or Secured Credit Card – department store and gas cards have long been thought to be great places for credit newbie's to start.  Another great option is a secured credit card which functions in a way similar to that of a debit card in that you'd place funds on deposit with an institution to offset any charges you incur.  This is a great way to begin or re-build your credit. 

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Nancy Osborne has had experience in the mortgage business for over 20 years and is a founder of both ERATE, where she is currently the COO and Progressive Capital Funding, where she served as President. She has held real estate licenses in several states and has received both the national Certified Mortgage Consultant and Certified Residential Mortgage Specialist designations. Ms. Osborne is also a primary contributing writer and content developer for ERATE.

"I am addicted to Bloomberg TV" says Nancy.