Putting your credit in order – Twin Cities
Most people find they have bad credit at the worst possible time. They filled out all the paperwork for a mortgage or rental application, only to find that their credit score was not up to par. By then, it is too late.
A little planning now can help make sure your credit is in the best possible place when you need it most. Here are some steps you can take to get your credit back in order.
Know your FICO
Your FICO score, or credit score, is a number that helps lenders, employers, or homeowners determine how much financial risk you may be at. A score of 700 or higher is generally considered “good” credit, but a score of 740 or higher is often required to get the best possible rates on home loans.
Through the Fair Credit Reporting Act, you can check your credit with the three national reporting companies, Experian, Equifax, and TransUnion, for free once a year. This allows you to determine if you have any work to do to obtain snuff credit.
Find fruit at your fingertips
Obviously, if you have major delinquencies or bankruptcy, rebuilding your credit is going to take some time. However, there are relatively quick steps you can take to improve your score, especially if you’re on the precipice of how much score you want on a loan.
First, if there are any accusations that you do not acknowledge, dispute them in writing. Businesses make mistakes all the time, and you shouldn’t have to suffer for them.
From there, if you have 30, 60, or 90 day late fees on an existing loan, call and ask if they’re ready to take it out. If your account is otherwise in good standing, they have little incentive to keep a small defect in your file.
Look at the use of credit
Using credit can be a bit of a balancing act. You want enough credit to show that you are responsible enough to make a timely payment, but you don’t want too many credit cards, and you definitely don’t want heavy debt over your collective credit limit.
Having debt over 30% of your credit limit is a major red flag, and 10% or less is ideal. If you’re about to make a major purchase, consider paying off your debt so you can fall below one of these thresholds.
Conversely, if you have very poor credit or no credit, consider taking out a credit card with a limited balance. Make minor purchases and pay off the balance every month.
Limit credit requests to a minimum
The credit checks themselves can have an impact on your credit score. Frequent requests for credit cards and loans indicate that you may not have the assets to handle your existing payments.
There are exceptions to this, however. There is no penalty for checking your own credit. Unsolicited credit checks by credit card companies and others, so-called inquiries, are not considered.
In cases where you authorize a third-party credit check, multiple checks within the same 30-day period count as one. This is to encourage loan purchases, so shop around!
Get your advisor online
Your advisor has seen it all and may have ideas for working through your financial plan to address the items that are negatively impacting your score.