Annual Credit Maintenance and Review
Now that your credit is back to normal you now need to take steps to ensure it remains normal. Every year you need to do a few simple steps to ensure your credit remains in perfect condition.
Step One: Review credit every January
I mention earlier in the book that you should set a reminder in your calendar each year to remind you to do this. This single step can save you tremendous stress if you get in the habit of doing this.
Each year you need to check your credit at each of the big 3 credit agencies. Even paying for your report is worth it.
Step Two: Dispute any mistakes
If you find any errors or inconsistencies in the report you need to write that credit agency and request they investigate this account and the issue you have discovered.
You need to keep up the pressure until this is resolved. If you find one incident there may be more with the other two credit agencies.
Step Three: See who is looking at your credit
All reports will list which firms have pulled your credit. Review this list and see who is looking at your credit.
Then review if you provided permission, did an application with these firms. If not, now is the time to make a list and contact them to see why they pulled your credit.
Remember each inquiry costs you points in your score so you do not want unnecessary inquiries. Credit cards have a clause that states they can pull your report each year so be ready to see these inquiries.
If you have questions about who is pulling the credit and you can’t figure it out. Write a letter to that credit agency and ask for an explanation, it is your right.
Step Four:
Remind yourself not to apply for more credit unless absolutely necessary. Do you need another credit card? No. Can the car last another year? Maybe. Can we save for the vacation instead of on the credit card? Yes.
Ask yourself some hard questions and reward yourself with a nice dinner (for cash if possible) for taking responsibility for your credit.
Start treating your credit score like you would your bank account. Nurture it and it will always be there for you in good and bad times.
Some more credit tips
Avoid Applying for credit:
This is obvious but bears repeating. Do you really need another credit card? Protect your credit. Avoid allowing anyone to pull your report unless you have to do it.
Limit your Accounts:
Try to limit how many credit cards you have, if you already have lots than focus on paying off a few and then never using them again. Do not close the old accounts just let them expire on their own.
If you are declined for credit:
You can always ask for a reason for your decline from the lender you are dealing with. They must provide you with an explanation. If you want to explore it further or dispute it you need to deal with the credit agency not the lender.
The lender can offer help but they cannot deal directly with the credit agency unless the agency begins an investigation into your file.
Pay your bills on time:
Not just on time but ahead of the payment date to ensure you are never late due to computer or human error. If you make it a habit to pay your bill 2 to 3 days before the due date you will ensure your payment is never late, or mistakenly late.
Pay your bills when you get paid, it’s easier on the mind. You see a larger bank account balance at this time and you feel you can pay the bills with no problem. It’s only a mind game but it works.
Keep your credit at 50% or less of the total credit limit:
This is a great tip, if you are using less than 50% of your credit on average your credit score will be on an upward trend.
Once you go over 75% your score will neutralize and may begin to drop.
Never go over your limit. If you must, call the credit card or account and ask them to increase your credit limit to avoid this. If you go over, your score will drop for sure.
Have more than 1 or 2 accounts:
It is best to have a couple of credit cards and maybe a line of credit or car loan or personal loan.
First the credit cards are a revolving line of credit so an R1 account and the loans are installment loans or I1 accounts. You want to have both as it strengthens your credit history.
The longer your accounts are open they better for your credit history so leave them open.
If you can see trouble ahead call the account:
If you see problems on the horizon, call the credit card or the lender and explain your concerns and ask if they can help. Many will be pleased to help with a possible missed payment or lower payment.
Lenders want to help you succeed as it means a paying customer that is now even happier for the help.
Just call and explain your situation and see what they will do to help.
Use your credit cards:
Use your cards for purchases. You need to keep the account active so make sure you use it. You can always pay it off each month but make sure you use it at least once a month.
Understand your rights:
Learn about your rights now. If you ever need to fight or dispute an issue you will be well prepared to fight for your rights.
In many cases you will find those you are talking to have less knowledge of your rights so this gives you an upper hand.
Check your monthly statements:
Review your monthly statements carefully. Go item by item to see if the purchase is correct and if you really made it.
If there are disputes, immediately call the credit account servicing line and make a request for an investigation into that transaction. This is your right.
Pay the higher interest account first:
When paying off balances always figure out the ones with the highest interest rate charges. These are the ones you want to focus on paying off first.
Make it a goal to pay off the highest balance account first. Then go down the list and pay off the other accounts
Call your Credit Cards and see about a lower rate:
You can negotiate your current rate. It doesn’t always work but it never hurts to ask for a lower rate. You can threaten to move your account to another supplier if they will not match the rate.
This is a bit of bluff poker as you do not want to do this but they do not know this. I have seen this work with a few of my own clients and was able to do it with two of my own accounts.
A drop from 19% to 11.5% is a nice savings. So never be afraid to ask.
Let your accounts get old
Letting your accounts get old is a good for your credit score. The credit agencies use the age of the account as a method to find your overall score.
The older it gets the more information is available to check. Lenders like to see a minimum of 24 months of credit especially for large loans and home mortgages.
If you can pay cash DO IT!:
If you can pay cash then do it! Not having to use credit is better all the way around. If you can wait and pay cash for the item you desire then work towards that goal.
These are a few tips that I have given to my clients and used myself. I hope they benefit you as much as they have me.
