Are you credit-challenged?

You’ve just applied for a loan or a mortgage. To your amazement, you’ve been turned down. See which of the following statements describe you best and find out whether you are credit-challenged.

1. I always pay all my bills, in full, by their due dates.

2. I frequently receive letters from financial institutions offering me pre-approved credit cards.

3. I own a house and have a mortgage.

4. I just got an automobile loan and a new credit card.

5. I keep on top of my mortgage payments, even if it means I don’t pay my credit card bill, in full, once in a while.

6. I always try to pay off at least the minimum amount on my credit card bill.

7. I sometimes spend up to the upper credit limit on my credit card.

8. I’ve applied for a dozen or more credit cards within the past six months.

9. I consolidated all my debts into one debt consolidation loan and am paying it off.

10. I am up-to-date on my income taxes and other debts, but am struggling to pay off my student loans.

11. I use one credit card to pay off the minimum balance on another.

12. I don’t believe in running up debt or even using credit cards. If I can’t afford to pay cash for something, I don’t buy it.

13. I have been turned down for credit within the past two months.

14. My bank just raised the rate it’s charging me on a loan, based on a credit report issued by a credit bureau.

15. I recently declared bankruptcy to help me start all over.

If statements one to five describe you best, you’re in perfect shape to get the credit you need.

Lenders rely on your credit report developed by one or more of the U.S.’s three major credit bureaus -- Experian, Equifax and TransUnion -- to decide whether to loan you money, determine the interest they will charge you, even to determine your automobile or home insurance premium.

Each credit bureau sums up your credit history into a single three-digit number, ranging from 300 to 850, known as your credit score. Typically, scores over 750 are excellent, while those below 620 are considered risky. Each major credit bureau has its own metrics for calculating your credit score so scores may vary slightly from bureau to bureau.

The information used to calculate your credit score comes from your past payment history, what you currently owe lenders, the length of your credit history, the number of new credit accounts you’ve opened or applied for and what types of credit you have.

As long as you make your payments consistently and on time, mortgages or bank loans should not affect your credit score negatively. And with a good track record for repaying money you’ve borrowed, you are likely to start receiving solicitations from financial institutions to open lines of credit.

If statements six through 10 describe you best, you may have had a problem, but are acting to correct it:

  • Paying off at least the minimum on your credit card reassures potential lenders that you’re committed to debt repayment. If you never pay off these debts in full, however, your credit score may suffer. Aim to pay more than the minimum.
  • Spending to the upper limit on your cards can affect your score, but you can mitigate this by consistently repaying the debt, with the goal of eliminating it.
  • Applying for lots of credit cards within a short period of time may affect your credit report and score negatively. You’re better off applying for cards as needed.
  • Repaying a debt consolidation loan is a good signal to creditors that you are taking your debts seriously.

If statements 10 to 15 describe you best, you must change your habits to get credit.

It’s a good idea to get a credit card even if you don’t use it much -- just to develop a good credit rating.

If you have declared bankruptcy, you will probably have trouble borrowing money for at least 10 years.

You are entitled to one free credit report per year from each credit bureau. However, experts recommend checking your credit regularly to stay on top of your credit and to be aware of any unauthorized changes that may be a sign of identity theft.


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