April 19, 2004
We love that you wear a suit to work, coach kiddie wiffle ball, yet listen to speed metal at insane volumes when no one's around.
Go ahead and be a rebel. But when it comes to your credit, it's best to come off as that straight arrow that your mother-in-law thinks you are.
Why? Because a good credit score can put thousands of dollars in your pocket. Just check out the range of rates for various credit scores. (Squeaky-clean borrowers qualify for 4.7% rates on a new auto loan. You'll shell out 18% in interest if your FICO score is in the 500s.) It's not just auto, credit, and home loan rates on the line. In some states insurance rates and even employment eligibility are dictated by what your credit record says about you.
There's nothing complicated about keeping your credit rap sheet clean. Here are six small ways to do so:
- Pay your bills on time, especially mortgage or rent payments. Apart from extreme circumstances like bankruptcy or tax liens, nothing has as big of an impact on your credit history as late payments.
- Establish credit early. Having clean, active charge accounts established many years ago will boost your score. If you are averse to credit, on principle, consider setting up automatic monthly payments for, say, utilities and phone service on a credit card account and locking the card away where it's not a temptation.
- Don't max out available credit on credit card accounts. Lenders won't be impressed. Instead, they are much more likely to assume that you have trouble managing your finances. Beyond two or three credit cards, it starts to get complicated.
- Don't apply for too much credit in a short amount of time. Multiple requests for your credit history (not including requests by you to check your file) will reduce your score. If you are hunting around for good loan rates, assume that every time you give your Social Security number to a lender or credit card company, they will order a credit history.
- Be neat and consistent when filling out credit applications. This will ensure that all your good deeds get recorded in a single file, as opposed to multiple files or, worse, someone else's file. Watch out for inconsistencies in the use of Jr. and Sr.
- Check your credit history for errors, especially if you will soon be requesting a time-dependent loan, like a mortgage.
If you want to dig in right now, order a 3-in-1 credit report from our sponsor, TrueCredit. It gives you a side-by-side comparison of the information the three national credit agencies have on you. And, just for Fools, they'll lop off $5 from the price and give you a free credit score.
Learn much more about how to manage credit and your credit rating in our Credit Center. And if you're shopping for a new credit card, give our Fool Visa card a once-over. We incorporated as many Fool-friendly features in it as possible.