Identity theft can be a frightening experience. And unless this has happened to us, anything on our credit report is based solely on our own doing. We are responsible for the outlook of our credit.
When creditors look into our credit history, it's like they're looking into our soul — taking a deep dive into our inner being. So we always want that to look good. Right? Because it's a representation of who we are — the type of person we are. A look at someone's credit report tells you immediately if they are someone you would be able to trust with their money. In essence, when someone gives us credit, we are using their money. So, here are four ways to take responsibility for your credit, and guarantee a good review.
1. Pay Your Bills on Time
It all starts with this. Once you receive credit from a lending agency, it's important to pay them —on time. The amount to pay, the interest, and the due date are all established early on. You usually receive a bill at least a few weeks before they're due. When a potential lender pulls your credit report, your payment history will reflect how you've been paying your bills. A good way of ensuring that you are paying your bills on time is to not wait until the due date to pay. Pay the bill as soon as you receive it. Even if you receive the bill late, you still know when the payment is due. So pay on time. Establishing accounts online or allowing automatic bill pay from your bank can help with this.
2. Track Your Spending
When you know how much you're spending every month, you not only know where your money is going, but it keeps you in check with where your money should be going. Make it a point to track your spending so you won't overspend. Overspending is a major contributor to people not having enough money to pay all their bills each month. Tracking your spending can help to avoid this problem.
Creating a budget is something I show you how to do as a financial coach. If you're interested in learning more, don't delay, email me.
3. Don't Over Extend Your Money
Having credit is good, but having too much of it can become a problem, and a nightmare waiting to happen. Don't make promises you can't keep when it comes to repaying debt, and don't overextend your money. You can't pay back what you don't have. When you're tracking your budget regularly and know how much available you have to work with each month, you know what you can afford to pay back. A general rule of thumb is to spend no more than one-third of your income on debt — all of your debt. So look at what you're spending (you can do this via your budget). If you're already over that or close to it, consider not creating any additional credit anytime soon.
4. Maintain a Long History of Credit
Having a long credit history is good to have; it actually helps your credit score. The more experience your credit report shows you have with paying your bills on time helps to determine whether you are a good person to lend money to. So if you have an older credit card that you rarely use, don't close the account. Keep it open, and use it once or twice during the year for small purchases, just to maintain that history.
5. Keep Track of Your Credit Score
In the unlikely event you do get hacked, or are the victim of identity theft, wouldn't it be good to know immediately? Keeping track of your credit score or your credit report can help with that. The sooner you're aware of something being off with your credit, the sooner you can address it and fix it. There are plenty of credit apps out there that help you do just that. At a minimum, you're entitled to one free copy of your credit report each year. You can receive that by going to www.annualcreditreport.com.