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Credit Card Tips
Do
Credit Cards Affect Your Credit Score?
It is easy to take credit cards
for granted. It has become so easy to say "Charge it" because now you
can do it in most places - even in the fast food restaurants. This
means that credit cards just about take the place of cash, which means
people are not watching to see how much they really can afford. When it
comes time to get a loan, though, that same person may be shocked to
discover that their credit is much lower than they thought - and it
could be because of your credit cards. Here are some ways your credit
card expenditures may be affecting your credit score.
The lender that you apply to
for a loan will most definitely look at your credit score. This score
is built up about you over time and is a record of your spending and
money handling habits. If you pay your bills on time - it is there. All
loans that you are paying on now are also there. The lender looks at
your score to see if you have a habit of paying on time and are
trustworthy enough to give you a new loan.
That same lender will take
other things into consideration, too, to determine your eligibility for
the loan. Things like your current job and your income will also become
factors.
Too Much Debt
Your credit cards, though,
could be a problem on your credit score in two ways. The first of these
is the total amount of indebtedness you have. Obviously, if you owe too
much you will not get the loan. What you may not know is how much is
too much? Lenders typically look at the figure of 36% as being the
maximum. That is, 36% of your debt to income is considered to be the
maximum ratio allowable. By the way, this percentage inludes the amount
you are now trying to borrow.
If you owe more than that, and
the lender gives you the loan anyway, you can be sure that your
interest rates are elevated and other terms adjusted, too. This will
probably mean that your repayment time has been shortened, and that the
amount of your loan may be reduced.
Too Much Credit
Another way that credit cards
affect your credit score is the amount of credit that they give to you.
Since every lender knows that a credit card could easily be maxed out
quickly, this is taken into consideration. While you may think that you
have three credit cards with nothing on them, the lender looks at your
credit report and knows how much credit you have been given. He or she
sees this as a potential problem - and that means trouble for you.
What To Do About It
1. Get A Copy Of Your
Credit Report
Mistakes can occur rather
frequently on credit reports. This means that before you apply for any
loan that you should get a copy of your credit report and look it over
for errors. If you find any, get them corrected quickly. After the
corrections are made, though, you will need to wait about six weeks to
make sure that the changes have been recorded.
2. Pay Down Your Debt
If your total indebtedness is
too high, be sure to reduce it first. You also want to make sure that
you can handle any new payments, too - unless you are thinking about a
loan for debt consolidation.
Another way to help you save
some money may be to get a new balance transfer credit card. Put the
old balances on the new credit card - if it has 0% APR interest, and
this will help you save money and reduce the debt quicker.
3. Destroy Unused
Credit Cards
Getting the best terms you can
on your new loan will means that you will be saving money over the life
of the loan. Destroying those unused credit cards and reporting it to
the issuing company will help bring up a damaged credit score. It will
also make you look more attractive to a lender in terms of a you now
being a safer investment of his or her company's money.
Once you get the loan, be sure
to pay at least the minimum amount of payment each month. You also want
to make your payments on time, and this will help you to keep your
credit score up where you want it to be.
By Mike Valles - Not to be copied
or redistributed without Permission of the author.
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Special Resources
Links
To the Big Three Credit Bureaus for your free credit
report:
Helpful EBooks
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Credit
Repair & Debt Collections Help For Consumers. A Self Help
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