Tristan Powys (Credit Manager) @ Lucid Living
We continue where we left off, in the 1st installment of this segment – on tips to help you improve your credit score.
6. Close idle lines of credit
Having fewer lines of credit available to you makes you less risky to creditors. Close all unused credit cards and accounts and have the creditors notify the credit bureaus that the accounts were close by you and not them.
7. Keep credit enquiries few and far between
‘Shopping’ for credit can trim up to 10 percent off your credit score so it’s best not to make any unnecessary enquiries. Every time someone runs a credit check on you it gets noted and negatively impacts your credit score. When you check your credit report, that does not negatively influence your credit score.
8. Revolving credit is bad for your credit score
The nature of your debts can be responsible for up to 10 percent of your credit score. If revolving credit – those lines of credit that can be used up to a predetermined limit or paid down at any time (e.g. credit card) – makes up most of your total debt then your credit score won’t be good.
9. No history, no credit
While having too much debt is obviously bad for your credit record, having had too little will also count against you.
The duration of your credit history (how long you’ve been a credit consumer) can make up to 15 percent of your credit score. If you have no, or a very short, history of credit then credit providers won’t be able to trust that your credit score is an accurate reflection of your credit worthiness.
If you want a loan but have no credit history, consider getting a credit card and pay it off completely each month. In this way you’ll indicate that you’re a responsible debtor that won’t cause the lender trouble.
Your aversion to debt is not misplaced, but using a credit card to build a credit history can be a good idea.
10. Check your spouse’s rating
Creditors also have access to your spouse’s credit record when assessing your credit application. If your spouse’s credit score is poor, this could impact negatively on your credit application.
11. Make arrangements to pay
If you find it impossible to make a payment, talk to your creditors and make arrangements to pay when you’re able to.
Contact them as soon as you foresee trouble; don’t wait for them to contact you.
If you are not succeeding, consider approaching Lucid’s debt counselors. They have the law on their side – so your creditors have to cooperate – with exploring lower payment terms.
12. Obtain a copy of your credit report and look for errors
According to the Credit Ombud (2010 Annual Report) about 70 percent of credit reports contain errors, so it’s vital that you check your credit report (get your INSTANT credit report here) before applying for a loan.
The most common errors to look out for are accounts that aren’t yours (possibly indicating identity theft), incorrect information about your accounts and information that is too old to still appear on your record (all judgments against you should be removed after five years while unfavourable information can only be kept for two years).
Contact your creditors and lodge a dispute with the credit bureaus if you found that your credit report doesn’t accurately reflect all accounts and the payments you made.