Welcome to the next installment in our Credit 101 series. In previous articles, we explained the different types of credit scores, what to know about credit reports, and what you can do to raise your score. In our next two articles, we will give you some useful do’s and don’ts to repair a low score or maintain a high score. In this post, we will cover credit do’s.
For a Healthy Credit Score, DO:
- Keep the lines of communication open with creditors. Have a bill you cannot pay right away—or a bill that is not finalized? You might be tempted to let it go for a few weeks or months, especially if it is a small amount. If they want you to pay right away, they will send you another letter, right? But there is no way of knowing that your creditor will understand. They might report it to the credit bureaus and then send it to collections. If you have questions about a bill or need some extra time to pay, you should always contact the creditor directly. Ask them your questions or let them know what is going on. If you need to delay before making a payment or you require a payment plan, make sure somebody writes it down just in case there is any confusion later.
- Regularly check your credit report and dispute errors. You are entitled to receive three free credit reports every year, one from each of the major bureaus. Each year, you should make use of these reports, checking them over carefully to make sure that all the information on them is accurate. If you find errors, make sure that you dispute them. Getting rid of false-negative entries as quickly as possible can help you to keep your score high.
- Set up payment plans rather than default on debts. Sometimes, you may receive a bill that is too large to pay, and you may not want to take out a loan. This is commonly the case with hospital bills, for example. Even if you have very little liquidity in your budget, it is worth trying to set up a payment plan. Many clinics will be willing to accept very small monthly payments if necessary. They just want you to keep paying. So long as you do, you can avoid a hit your credit.
- Look into non-profit credit counseling if you need it. If you are looking for extra recommendations for how you can improve your credit score, there are non-profit credit counselors that can help. A counselor can work with you to come up with a personalized plan.
- Talk to your landlord. Many people assume that their landlords are reporting their timely rent payments every month, and that they are building credit just by paying rent. But landlords often do not report this information at all. So, instead of making assumptions, you should ask if your landlord is willing to report your timely payments to help you build credit.
- Pay off your credit card balances swiftly. It will be easiest to build or maintain your credit if you generally try to use your credit card like cash. In other words, make your purchase with your card, then immediately pay off the balance. Turn it into a habit so that you do not forget.
- Get a secured card or get added as an authorized user. If you are still working on raising your score and you want to take a shortcut, you can either apply for a secured credit card or get a family member or friend with good credit to add you to one of their accounts as an authorized user.
Buying a Home in San Diego, CA with Community Mortgage
Now you know what to do for a high credit score. By following these recommendations, you can protect your score before and during the mortgage application process. In our next post, find out what not to do in order to keep your credit score high. Have questions about credit scores and applying for a home loan? Give us a call at (619) 692-3630.