The Latham Report: Protect Your Credit Now!
Washington,
May 29 -
Many Americans have been hit hard by the housing crisis. And, while that brings to mind discussions of home prices and foreclosures, I want to bring something to your attention that hasn't had as much media attention: credit. Due to the issues surrounding the housing crisis, it's much more difficult to get loans for things like homes, cars, and other items that make our lives easier and make our lives better. Credit is at the heart of this issue, and it's more important than ever to make sure that we understand how credit works.
Many people understand credit, but there are many people who don't. And in the population of people who oftentimes don't understand credit, we find young people. As soon as a young person starts paying for things, like music, clothes, or even gas for getting to school, they should learn about what credit is and why it is important to protect it.
While each person has three credit scores, one each from Experian, Equifax and TransUnion, the important score to note is the FICO Score. The FICO score condenses the three other scores into a single number, and acts like a grade that you get for a class in school. And just like a class grade, it is made up of several different components. An individual's payment history, the amount of debt you hold on a credit card, the number of credit accounts you open and the length of time you have has your own credit history – the longer you've had good credit, the better your FICO score is.
It is important to know what lowers your score. Paying your bills late or not paying your minimum amount hurts your score. If you have a high amount of debt compared to your credit amount, you are also lowering your score. Also, having too many credit cards can hurt you. Other things to watch out for are not alerting current creditors that you've moved or changed names, not checking your own score and not using your full legal name in financial documents.
So how do you improve your score? First: pay your bills on time and make more than the minimum payment on your credit cards. Make sure your balance is low in relation to your available credit. And, pay off your credit card debt.
There are still a lot of myths about credit and how it works. Here are some of the main credit myths that you should know. The first myth is that your score might drop if you check your own credit. This is not true. Checking your own credit is good, and it does not affect your credit score. The second myth is that once you pay off something negative on your record, it will disappear and not be a negative mark on a credit score. This is also not true. Negative marks eventually go away, but it will likely be a couple of years before that happens. Fix those problems now to make sure negative marks come off your score sooner rather than later. People also think that closing old accounts will improve a credit score. In fact, having old accounts on your credit report show that you have a credit history. Remember, having a long positive credit history is part of your FICO score and can be beneficial for you.
Remember, in these times keeping an eye on your credit score is more important than ever.
