Managing Credit History
Why is it important to establish and maintain a good credit history?
Having a good credit history will be a central part of making a successful personal and financial future for yourself. Your credit history can help open doors to you or keep them locked. A student loan can be a first experience with credit.
People and businesses will use this record of how well you kept your previous payment agreements to judge whether they can risk making a similar agreement with you. Cell phone companies, landlords, lenders, insurers, even possible employers often make decisions about your future based on your credit history.
It is a good idea to check your credit report frequently. Except under certain circumstances, there is a small charge for this service. The three primary credit bureaus are Equifax, Experian and TransUnion. Use caution when requesting a copy of your credit report. Never give personal information to someone unless you initiated the contact, on the telephone, by mail or on the web.
Tips for Establishing and Keeping Good Credit
- Make Payments on Time - It sounds so simple, but life is hectic and things do slip our minds. Establish a routine for paying your bills and keep to it. Mail payments a week before they are due so they arrive on time. Those late fees can add up.
- Pay What You Owe - Of course it is best to pay the entire amount due each month, but at least pay more than the "Total Minimum Due." Never skip a payment.
- Good Communication - Never ignore correspondence. Contact your creditor if there is a problem. Good communication with your creditors can help you avoid withholding of records and services, negative credit bureau reporting and more. If you change your address, let your creditor know.
- Do Not Overextend Yourself - Keep your "available balance" in mind. It is the difference between your credit limit and your balance due. Having an "available balance" means there is credit available in the event of an emergency and you can avoid incurring "Over Limit" charges. Before applying for a new credit card or loan examine your spending and work out a realistic budget. This will allow you to pay your bills and still live comfortably.
Avoid Impulse Purchases - For some reason impulse buys are especially hard to pay off. Try to avoid putting the things you buy on impulse on your credit card. When you do your spending plan, allow room in your budget for a few impulse purchases; then stick to your plan. When tempted by something, delay the purchase and think about it for at least a day or two. If you think about it, you might decide you don't want it after all. Also try "visual spending." Imagine paying for the item with cash. Is it still worth it?
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