8 ways to keep great credit history and stay out of credit hell.

The information on your credit report can positively or negatively affect your credit score. Your credit score determines your ability to obtain credit and is approved for loans to better your life. Having a poor credit score will basically keep you in credit hell and be placed on what is considered a “high-risk category”, which means when approved the interest rates will be significantly higher than someone with a great credit score. Having a low credit score will cost you literally hundreds of thousands of dollars over the lifetime of a 30-year mortgage loan. Example $200,000 mortgage on an 8.5% vs a 4.5% rate would cost you over $190,000 dollars. Therefore, a good credit score is important.

Each bank has certain criteria in how they approve loans, they need to make money like anyone else and they charge fees and rates to keep the bank solvent so they can show their shareholders a profit. It’s in their best interest to approve loans and bring in money to the bank monthly. An example, the person with a credit score between 660 and 679 would pay more in interest compared to the person with an excellent credit score of between 760 and 800. 40 to 70 points variances in a credit score can mean everything to a bank or a person trying to get approved. The lower the credit scores the more negative impact on your life, compared to someone with what would be considered excellent credit.

If your credit score is above average or you have an excellent credit score, maintain it! When you make mortgage payments late or skipping credit card payments its disastrous, why do you think I am writing this article trying to help you, I have been through it and know how much it hurts. Far too many people do stupid things like I did. Just one late mortgage ruins your credit and if you attempt to refinance your mortgage good luck getting a decent rate, it puts you in another category and now you need 12 months of on-time mortgage payments.
If your credit score is already below average, there is hope but it takes time as a result of poor decisions and irresponsible financial actions in your past by taking steps to begin rebuilding your credit you have made the right step forward. This can take months but not years and it will get better.

For now, let’s focus on ten things with great tips for improving your credit report, and will boost your credit score. Every step forward will have an impact on your report, and you will be able to see the results monthly. This can change within six to twelve months or less.
When it comes to repairing or rebuilding your credit, you can do this yourself. You need to read and take time instead of watching your favorite sitcom for a half hour or an hour, invest yourself and your life. Here is what you will need, phone, pen, some paper and being honest with yourself to fix the situation. In all seriousness, it may sound harsh but just do it. If you read this far you see I am being truthful with no BS, just giving it to as a kind and caring person who wants to help.

Step 1: Pay Your Bills on Time.

Although this may seem extremely obvious, every late payment creates negative information that appears on your credit report and are often responsible for your credit score dropping like a rock from off a building. When it comes to loans and credit cards, you have without any question make the minimum payment each month, no exceptions unless you want to live in credit hell.
Think of credit hell this way, every bad move results in three bad moves down, instead of above being above ground you are feet below ground trying to climb you way out of this credit hell. The impact on your credit report and credit score will be considerable if you’re continually late. It is, however, easier to explain a bad time in your life when speaking to someone about getting a mortgage and especially if you make great payments over a 12-month period.

Having a credit card is a benefit and the problem a lot realize the benefit of a credit card until you are with friends and you do not have one and you’re an embarrassing situation. The way to build up great credit is to pay on time all the time and ask the credit provider for a small increase every six months, if possible. Each time you get an increase you’re proving your creditworthiness. This allows you to budget your money and make intelligent decisions because you are building credit and now can make intelligent based financial decisions for yourself. The most important thing to do is to keep your creditworthiness at or below 30% of your total credit. This will always keep you with a very high credit score. This is something the credit card companies will not tell you.

So, what is like to stay credit card hell, well one way is to go into collections or having an account be charged-off. Yes, legally you do not own the debt anymore, but it ruins your credit score. Remember once that account goes to a collection company it been charged off. They cannot legally get the money from you because they sold it to a company to collect the debt for cents on the dollar. Once you agree to pay that debt you lose. It will not make your credit score because the original creditor will not help make your credit score higher by saying you now have a clean score. It will show the charge off. Collection companies can only say you paid a debt it does not go back to the creditor because they bought the debt. Very important to remember when trying to fix your credit. Always remember to take a responsible approach, paying what you can and working with your creditors, DO NOT BE AFRAID TO CALL THE CREDIT COMPANY, they will help you. No one wants to lose you as a customer because when you back to normal they want you to have the buying power.
The bottom line and the most straightforward thing you can do to protect your credit score and pay the bills on time…. It’s that simple!

Step 2: Keep Your Balances Low

As we said before the most important thing to do with your credit score is to make sure your overall credit to debt ratio is below 30% this puts you in a very powerful position. Your credit score will strongly be I favor of 775 or above. If your credit debt-income ratio goes above 35% you will lose more opportunities for a higher credit limit. You can have lots of credit but if you are maxed at 80% or more your credit score will be below 650 because you are becoming more of a risk even though you are making monthly payments because now by extending you more credit you are more likely to start defaulting on your credit lines. If you have a $1,000 credit limit on a credit card, ideally, you want to maintain a balance of less than $350 and make timely monthly payments on the balance that is above the required monthly minimums.

Some people will get 5 or 6 credit cards and use some or all of the cards to spread the risk across the cards but be careful and always make sure you’re your debt to credit limit is so you do not pass that magical 30% threshold. Why do people have black cards and platinum cards because they understand how important this rule is to follow. You can make less than $100,000 a year and have $100,000 credit limit over time because you demonstrated the ability to pay on time and charge and then pay off the card. It’s up to you in how you want to live, and it takes time but it’s something to do and be proud of, you will get there.

Step 3: Keep Your Good History Counts, Don’t Close Unused Accounts.

History, history and more history, it’s like having an imprint of code on your neck. By having a good history, creditors can scan you and see how much of a risk or little risk you are by having a good history with long-standing creditors. This is a big impact on your score because it represents how you handle your money and how your history is with that creditor. Simply, the longer your positive credit history is with each creditor, the better.

You do not want to close these older accounts, its positive information for your credit file. Old credit history, if it’s good, will always have a positive effect on your credit score, it shows creditworthiness. If you have paid off a car from seven years ago with a price tag of $45,000 and you paid that over five years and had no late payments you really want that history, it will benefit you.

Step 4: Only Apply for Credit When It’s Needed, you do not want a lot of inquiries

You are at the retail store, like Best Buy. You say to your wife, “hey we need a new refrigerator, let’s get one.” If you’re in the market for this, it’s common for you to walk in and a good financing deal on a larger purchase. 12- or 18-months interest-free financing with no payments is always attractive. Be careful and read everything because say you want to pay off early and they have a prepayment penalty then it’s not such a good deal, so be smart, not everything is as good as it seems.
Remember to be smart with any application and read everything and do not for any reason, do not go to three different stores looking for the best deal and fill out three applications because each inquiry can cause your score to drop as many as 10 points each time. Find the best deal and then fill out an application and ask the person how they approve and if its retail stores own banks or who do they partner with if they know. Fewer inquiries the better your score.

Step 5: Separate Your Accounts after a Divorce.

Yes, I know this is not a fun subject for some but better to be straight with you then talk around the subject. During a marriage, it’s very common for a married couple to open joint accounts for all types of loans. It’s always best to keep things separate but eventually, you can consolidate all your cards and share the credit. opened or a spouse’s name is added to existing accounts. If you get a divorce, things can get very tricky.

People fight and then cards do not get paid and then credit gets ruined. That’s the worst case. You must remember that you are both legally responsible for the debt. If both names appear on the account, you are responsible for it.
In the event of either spouse dying you have at least 3 to 6 months to notify the creditors that a spouse is now deceased. I know this is a hard for anyone and a lot of people forget but always make sure you have something in your will that will let someone know to handle these affairs properly for you, it can hurt you later on.

Step 6: Correct Inaccuracies on your report, very important!

If you want to improve your score ASAP pull the report and look for old information that could negatively affect your score. Call or send letters to these creditors to have that information removed. If you have something from 10 years ago, they cannot legally report it on you, and they must remove it from the credit bureau. You can see an increase in your credit score within 30 to 60 days realistically.

Step 7: Bankruptcy, do not do it, it has to be the last final resort.

Bankruptcy can happen because things in life get away from you and things that were in your control got uncontrolled and now, you’re stuck. When you file bankruptcy basically you are now in credit hell for at least 10 years. You will not be able to get a mortgage; renting will be difficult and getting a car will only happen at very high-interest rate because you are now a very high risk of defaulting. If you can avoid bankruptcy try your best to not do it. You are better off letting something charge off or just work out a deal with each creditor and tell them your situation. Cancel all the cards off first except at least two with low balances that you can handle.

If you offer cents on the dollar to settle cards most creditors will work with you because they know a charge off is not worth it and would rather have you make a low monthly payment and settle the debt because they know once its charged off you are not legally responsible for the debt anymore. If you do file for bankruptcy, the best thing you can do is slowly rebuild your credit by getting secured cards once you can afford to do so and build your credit from there. Rebuilding your credit will take time and I mean not months but years. The biggest piece of advice is to get secured cards and never miss a payment.

Step 8: Work Deals with Your Creditors.

When I had my issue with my bank cards 10 years ago the first thing I did is call all my creditors and speak to each one of them and told them exactly what I could afford for six months. I explained to all them that I would have everything straighten out in those six months and then be able to pay off balances quicker and get my credit back in time. I did that with 8 of the 10 cards I had because I needed to have two cards I could use for emergencies and believe me it helped very much. When you lose a lot of money in one day and you need to figure out a plan, you do not sit down waiting for people to come to you call them and fix the situation.

If you want to keep a decent credit score it’s better to chase, then be chased for money owed and people respect you more for being honest and trying to fix the situation. Each person’s life is different and believes it or not people will be understanding and help. So do not skip payments, answer the phone and do not yell at the creditors it not their fault. The negative information is much worse effect on your credit score than you are being straight with people willing to fix the situation.
Depending on the level of your financial problems, most people will work with you to solve everything. Here what you can expect, ask for a reduced interest rate over a six-month period. Lower your monthly payment based on the balance. Do not charge you any charges or late fees over that six-month period. If you have a loan, ask them if you can skip three payments and put it on the back end of the loan so you have 90 days to straighten out your credit and money issues.

You may be able to refinance your loan at a lower interest rate or consolidate the debt into one payment but be smart and make sure you afford this option.

In the end, the advice we talk about here is to put in a better financial situation for life. Problems come and go but your credit report is important, and your credit history is very important because it allows you to do things that better your life. Be smart, pay on time and if not fix that credit history.