We all know that when we apply for credit, especially for a mortgage or the purchase of an auto, that we must have a great credit score to not only qualify for credit but also to qualify for a low or zero (auto loans) interest rate. My best reasons are as follows: One, an "excellent" credit score will get you the best interest rates available. A "good" credit score will most likely leave you with a higher than desirable interest rate. That high interest rate, my friend, is what you want to avoid. You want an "excellent" credit score. Second, by keeping your credit score well above 700 you will most likely always be able to get the credit that you desire with a low interest rate.
If you have credit cards, and hopefully it's only one or two, both with a low balance, my advice is not to close the credit cards once you get them paid very low, and I'm talking like keeping the balance always less than $50 each or zero them out each month. You always want to have one credit card for emergencies. My idea of practicing good habits with credit cards is to have only one, keep it paid low or zero it out every month. For instance, should you owe $100 on a card, pay the $100 on it but make sure you make a small purchase, perhaps dinner out, before the $100 gets posted as paid. Go out and make a small purchase each month, just to keep your card active. I have found that if you pay off a card and leave it inactive for awhile, the creditor who issued the card will no doubt close the account due to no activity. It has happened to me. Having a "zero" balance on your credit card account will not hurt your FICO score, but closing the account can have an adverse affect on your credit score. Remember, I'm speaking from my very own experience, and only from my own experience.
Closing an account can cause you to lose the available credit limit that is associated with your account. Also, your balance-to-limit ratio will increase as a direct result of closing the account since that amount of credit will not show as available to you and can cause a drop in your credit scores. After paying off some cards, I thought I was doing the right thing by closing those accounts that I had paid off....I could not wait to call and close those accounts....well, .that was not a good decision on my part. Keep that in mind if you are thinking about applying for a loan in the near future. Remember to keep your cards active, make a small purchase every month or two and pay it regularly and always on time.
Another important factor in keeping your credit score high is to pay those bills by the due date. You can forget about the "grace period". My own personal experience is that it works better for you if you pay by the due date....ALWAYS. You should never look at the grace from my own personal experience that the most important steps to create good credit scores is to make the payments on time, not within the grace period time. Pay all your regular bills on time and always pay them in full, not just a partial payment.
Apply for those new loans only when absolutely necessary, make your payments on-time and never carry excessive debt.
The following suggestions come from my own personal experience, and there is no better wake-up call than learning from your own experiences and bad choices.
1) If you have several credit cards, start paying extra on the highest interest card. You will be amazed at how you can lower a balance on a card by taking that one simple step. Once that card is paid, begin paying the amount you were paying toward that card every month on the next highest interest rate card along with the regular payment you are making on that second card. When the second card is paid in full, apply the amount you were paying on that card each month to the next highest interest rate card. Keep this up until you have all your cards paid in full. Be patient. It takes time, dedication and determination.
2) Call your credit card issuers and see if you can get your interest lowered. If not, perhaps you have one card that has a low interest rate and the issuer will allow you to transfer a high interest balance from another high interest card to the lower interest one.
3) Pay those cards off as soon as you can and shred that plastic. Credit card debt can be a nightmare. We want sweet dreams and not nightmares! Remember to keep one card for emergencies and make a regular purchase on that card and keep it in good standing by paying it in full on the due date.
4) I understand that another way to build up your credit score is to apply for a "secured credit card" by a reputable credit card issuer. I was told this by a friend who was trying to build up her credit score. I understand that you put your money into a secured credit card as security and then when you charge something on the card, make sure you pay regular payments and pay them on time. I'm told this will increase your credit score. It sounds like a good idea but I would make sure it is a reputable credit card company. After all, that is your money you are putting into that secured credit card as security that you will make your payments and make them on time.
Here is an example of how long it will take you to pay off a credit card at 17.9 APR with a balance of approx. $3,388.
By making the minimum payment each month the time it will take you to pay off the balance is approximately 19 years. You will have paid a total of approximately $7,861. That is approx. $4,473 in interest alone. If you pay $122 per month, the approximate time it will take you to pay off the balance is three years. You will have paid a total of $4,404 with $1,116 of that as interest. This is figured with an interest rate of
17.9% APR. Now that is a rude awakening.
My thought for the day:
"Don't let your worries get the best of you;
remember, Moses started out as a basket case."
