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What Do You Know About Credit?

Have you evaluated your credit score lately? If not, now is the time to make sure you are well prepared for the implications of the items listed in your credit report. Since having a good credit score impacts your ability to access capital, qualify for employment or obtain favorable ratings for insurance, you should review your credit history regularly. Think of your Credit Report as an electronic resume of your ability to fulfill your obligations. What would I find if I were to review your credit report? Would I be likely to offer you a job? A Mortgage? A lease on a car? Will I see that you are someone who is responsible or someone who is constantly behind on their responsibilities?

Maintaining good credit starts with establishing good financial habits. Unfortunately, once you have negative marks on your credit history it becomes increasingly difficult to overcome. When reviewing your credit report, make sure you are doing the following:

  • Examine your report to make sure the information is correct. Many items listed may be belong to relatives or others who at one time were associated with you. Clean up the errors first. This is on you to fix. This will take some time so be patient.

  • Look at the amount of credit available. If you are maxed out on your credit lines, this can have a negative effect on your score. By keeping account balances to 1/3 of what your credit limit is you can demonstrate you can have credit but not use it. This will help raise your score over time.

  • Compare your credit score and report with multiple credit rating services. Are they similar? If not, check to see where there are discrepancies and work to correct them.

  • Don’t randomly open new lines of credit. Every time you have someone check to see if you are eligible for a line of credit you are impacting your score.

  • Make sure you are protecting your identity. There are several identify theft protection services available, which can help alert you to misuse.

Keep in mind your credit score is not only limited to credit card usage. You must be in good standing with regards to your regular bills such as utility, cable, rent or mortgage payments. Late or missed payments are reported and will negatively impact your credit score which can take years to repair. Judgements or liens against you in the collection of a debt are also reported and will have the same negative affect.

For those of you that are younger, start building your credit now. Either apply for a credit card on your own or ask your parents if you can become an authorized user on their account. Credit cards are not intended for you to live on. Limit your usage to an amount that you can comfortably pay off each month such as gas or groceries. If your parents are allowing you to be an authorized user; know that your decisions will now also affect them. They have entrusted you with their credit rating, so careful use is important. Lastly, one credit card is ALL you need to get started. Many make the mistake of obtaining too much credit when it is not needed.

Maintaining a positive credit history starts with you. Since debt is a wealth eroding factor, you must understand its implications on your financial success. By choosing to work with a Leap Professional you will have the tools necessary to do just that.

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