Watch out for store cards
Department stores are always trying to get you to sign up for their credit cards by giving you a discount on your purchase if you sign up right then. This could work out well. But it's good to know that store cards can hurt your credit in three ways. First, the inquiry will cause your score to go down. Second, the new account that will soon show up on your report will lower your score. And third, store cards usually have a low credit limit, often just a little bit more than the amount of your purchase. The FICO credit scoring model gives a lot of weight to the relationship between your balance and your high credit limit, so this can be very bad for your credit.
Look out for that high limit
I run a national company that helps people fix their credit reports, and I talk to people all day about their credit reports. One piece of advice we like to give our customers is to act like their credit card limit is only half of what it really is. Doing this takes some self-control, but it can have a big effect on your credit score. If your balance is more than 50% of your credit limit, your credit score will start to go down. If your credit card balances are close to your credit limits, you might want to call the credit card companies and ask them to raise your limit. You'll be surprised at how quickly this can raise your score.
The credit trap of shopping for a car
I can't tell you how many times we've looked at a credit report and seen more than one inquiry for auto credit. When we ask our customers, they tell us that they only went to two other dealers. Most of the time, car dealers will shop around for you to find the best interest rate. If they look at three companies for auto loans, you will have three credit checks. These many inquiries can hurt your credit score in a big way. This isn't the fault of the car dealers. After all, they are looking out for you, but it's best to know what could happen. If you are looking for a car, don't give out your Social Security number until you know which car you want.
No more Mr. or Mrs.
Nearly every day in the credit repair business, we meet someone who helped someone get a car loan by co-signing for them. I'm sorry to say this, but if they need you to co-sign, it's likely that they won't pay their bills on time. And this will destroy your credit. I know this is a hard choice. It's difficult to say "no." If you find yourself in this situation, I suggest you try something else. Sign the document. But ask them to give you the payment book when it comes. Have them pay you instead of the company that is paying for the car. You will pay your bills on time. And maybe they will feel more obligated to pay you on time than they would a faceless auto financing company.
Don't get complacent
Check your credit every now and then. The Fair and Accurate Credit Transactions Act (FACT Act) was passed by Congress in December 2003. It gives you the right, among other things, to get a free credit report from each bureau once a year. This law was put in place to protect you from the many credit reporting mistakes that happen all the time. Don't think that the credit bureaus are reporting everything right just because you are doing everything right. Get your reports and check them carefully for mistakes. You deserve it.
No need to explain.
Is there anything wrong with your report? Whatever you do, don't write an explanation for the credit bureaus to put on your report. No lender wants to hear about your life. Sorry! But it's true. If your credit report has an error, you should dispute it! Hire a good credit repair company if you don't think you can handle dealing with the credit bureaus. They know how to do the job because they have done it before and know what to do. A good company for fixing your credit should be both cheap and good at what it does. You should never have to make a promise for a set amount of time. Talk to someone on the phone before you hire them. Make sure you are comfortable. The money is yours.
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