Credit Blog

Wednesday, 04 March 2009 00:00

 When was the last time you thought about your credit?
 
Like many of you I listen to webinars trying to keep up with the industry especially in these economic times. 
 
"I have to share" : The other night I listened to a webinar on credit. I know a lot about how credit works, it is after all, the lifeblood of an investor, but I have noticed a change. The Credit Card and Mortgage Companies are constantly calling, my limits are being lowered, and a lot of the rewards programs are diminishing even though I am paying on time. So I was very interested in what would be discussed in the webinar.
 
Jeremy Roberts was the presenter and clearly stated at the beginning that these are his opinions, but he has been in the business of helping people with their credit for many years.
 
First he provided the break-down of how your credit is determined:
 
40% is based on your payment history
    - Are you making your payments on time
    - Have you ever been 30, 60 or 90 days late
       and how many times
32% is based on revolving credit history
    -How much credit you have
18% is based on the length of established credit
    - it is crucial that you do not close your accounts
    - your credit score is based on all available credit
       vs. all credit debt
10% is based on new credit
    - it is important to continue to grow your credit
 
Helpful Tips:
*Have several credit cards; doesn't mean you have to use them, but have them so that your total available credit is high.
*If you make around $50K a year, try to have 4 credit cards. If you make $100K a year you should have more than 6.
*Don't put everything on one card; spread the charges out and keep the balance under 50% of the available credit as this will help your score. Don't ever use all the available credit on one card even if you pay off the full amount each month; it will still hurt your credit score during the month it was maxed out.
*If you have a card that is about to expire, the credit card company may not send you a new card and close the account because of "lack of use". Do not let them do this. Mark on your calendar when your cards are to expire and make sure you call them and ask for new cards.
*Keep in contact with the credit card companies, loan companies, and mortgage companies. Everytime you call they capture that in their computer system. They are more willing to work with people who are in communication with them.
*Pull your credit report every month and work hard to remove all negative items. Keep copies of all the paperwork that was provided in order to remove the negative remarks from your credit in a folder as they may reappear on future reports.
*Every Quarter try to get your credit limit increased and your interest rate lowered.
 
This may seem like a lot of work but these days everyone from employers, insurance companies, banks, cell phone companies and even utility companies look at your credit to determine...how risky you are.
 
Now what are the credit card companies doing?
I couldn't figure out why the credit card companies where lowering my available credit limit even though I either paid off my cards each month or made above the minimum payments on time each month.
 
The answer...
Credit card companies are hurting. Today Capital One reported huge loses and expects it to get worst for 2009. A way for them to capitalize is to lower the available credit; in turn this hurts your credit score, which means they can charge you a higher interest rate because you are now considered risky. Yes you read that right... It does not matter if you are a great client they need to get those interest rates up! Also, consumer beware! I don't know if you have noticed but many credit card companies do not give you a grace period to pay your bill. If they do not receive payment on the 1st you are late.
 
It is vital that you start looking carefully at your credit. Don't throw your hands up and not use your credit cards because that will hurt your credit score as well. We as consumers just have to pay more attention!