Do you have a poor credit score? Are you aware how your credit score affects you? A lot of people tend to spend a little too much during Christmas and it may have a detrimental effect on your credit score if you are not aware of what is and is not on your credit report. A less than stellar credit report can cost you in ways you may or may not be aware of. The single largest area where you can see increases in your costs are higher interest rates for those with lower credit scores. The higher your credit score the better rates you will get from store cards to credit cards to car loans to your mortgage. It is key to stay on top of your credit score so you know where you stand with your lenders. Lower credit scores can even mean you may not be eligible for mainstream credit in any form and may have to settle for sub-prime lenders and you will most likely pay extremely high interest rates to your lenders to compensate for the risk of lending to you based on your credit score.
For an example on how low credit score can affect you, a score below about 730 can add a percentage point or two to your mortgage. Now while that may not seem dramatic over the life of a 30 year mortgage that can cost you thousands of additional payments in interest charges. And as far credit cards and store credit is concerned you can expect to pay the highest rates that they are allowed to charge to compensate for the additional risk of loaning to high risk borrowers. And remember low credit scores can even prevent you from borrowing at all. A low credit score can even affect your insurance rates. If your score is low enough insurance companies can be just like financial lenders and charge you higher premiums or refuse to provide you coverage at all.
How can you ensure you get the best interest rates you can or the lowest premiums your insurance company offer? Start by taking advantage of the annual free credit report from each of the three big reporting agencies. And since it is wise to always know what is on your report to ensure you are getting the best rates you can it is also good to use as a tool to monitor your reports for suspicious activity or possible fraud. And while you are doing that check your report for any errors it may contain that could lower your credit score and if they are indeed legitimate errors the credit agencies have 30 days investigate your claim of an error and remove it provided it is indeed an error. Ask for a report from one of the three reporting agencies once every four months that way you are monitoring your credit report year round.
Pay your bills on time by every due date to help keep your score healthy. Paying your bills timely can account for anywhere from 30 to 40 percent of your credit score. It is very important that you pay every bill in a timely manner prior to its due date. A second way to keep your score as high as you can is by watching your credit usage and do not spend too much on your revolving credit cards. The lower your outstanding credit usage is to your available credit the better your score will be. In a perfect scenario you should keep your credit usage at or below 30 percent of your available credit limit. That will help keep your score higher than if you are highly leveraged. And it is not viewed on a whole basis and by having one card maxed out it will lower your overall credit score. Bankruptcy or a short sale on a house can be a negative on your credit report for many years and there is not much you can do to remove these negatives as they will take time to fall off your credit report. But if you have minor blemishes on your credit report ensure they do not become habits and they will have minimal impact long term.
The key to keeping your credit score as high as you can it to monitor your report for any errors, reduce or manage your use of your credit and always pay your bills in a timely manner. While there are many factors that go into a credit score these are three areas that you do have control over. Also a part of your credit score is the length of time you have had your credit open so it is important to maintain accounts that you have had for several years in order to help boost your credit score.