Smart Borrower Center
Tools to help you borrow better
Maybe you thought that with the toss of your cap on graduation day, you’d no longer have to worry about making good grades. But there’s one grade you need to be aware of throughout your financial life: your credit score. Having a bad credit score can keep you from being able to buy a house, car or insurance, and a good credit score can save you thousands of dollars when you do. Here are a few ways to ensure you’re on the credit "A list":
1. Follow the rules
It sounds simple, but it’s the best way to get and keep a good credit score. Use your credit sparingly, keep your balances low and pay your bills on time.
2. Sit quietly
If you’ve made a serious credit mistake, consider putting off major borrowing until time has erased it from your record. A bankruptcy will show up on your report for up to ten years; a loan default sticks around for seven. Go to www.myfico.com to see how much a better credit score could save you over the life of a loan.
3. Proofread
Check your credit report, for free, once a year, at www.annualcreditreport.com. If you notice any mistakes, contact the individual consumer credit reporting company – either Experian®, Equifax® or TransUnion® -- that issued the erroneous report.
4. Pass on the extra credit
Every time a lender who is giving you a new loan or credit card pulls your credit report, your score could get docked about five points for six months. So resist the urge to sign up for a new card every time a store clerk tempts you with an offer of 10 percent off today’s purchases.
5. Keep a little extra credit
It may sound counterintuitive, but it won’t necessarily help your score to cancel credit cards that you already have. That’s because your score is based in part on how much of your available credit you’re using. Lenders generally like to see a balance of less than 35 percent.
6. Work quickly
Even if it means having several different potential lenders pull your report, you can still shop around for the best rate on a home or auto loan without having to worry about hurting your credit score. Two or more inquiries of this sort count as one inquiry – as long as they are made within the same shopping period. The length of the "shopping period" varies depending on the version of the FICO scoring formula used by your lender and can be either 14 days (older versions of the scoring formula) or 45 days (newer versions of the scoring formula).
7. Get a private tutor
If you just can’t seem to get a handle on your finances on your own, maybe it’s time to get some guidance from a credit counselor. But be careful about who you pick. The Federal Trade Commission offers great advice on getting advice at http://www.ftc.gov/bcp/conline/pubs/credit/fiscal.htm.
Published on April 09, 2007