February 5,2009
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Your Credit Card Reputation, Pt.4
Clean up report and seek better terms from lenders.There are many opportunities for credit card mistakes because that list is so detailed. Sometimes, merchants are slow to follow up on corrections and the bureaus never get updated. It may be necessary to contact the merchants themselves to get them moving. Other times, you may find references to another person tacked onto your report. They may have the same last name or a bad data entry may have occurred. Some times you'll see the same credit card account listed twice in two different ways. No one's ever going to admit to those but, the bureau is responsible to fix them in a timely manner. After all, they may be selling that information to credit card inquirers several times a month. It might as well be accurate.
Check out your ‘credit-utilization ratio'. You may not see that term printed on your report but, this measure carries a lot of weight when determining your FICO Score. A healthy ratio is to owe 30% of the total you could owe, when adding up all of your different credit cards. Lenders like this 30% figure because they expect you to be paying them interest (finance charges) every month while, never over-extending your credit. If you find your ratio is above 30%, either pay some down or ask a credit card lender to increase your credit limit. Don't worry about home equity loans freezing, FICO (the Fair Isaac, company) doesn't include it.
Applying for new credit cards can diminish your score but, only by a little bit. Just don't go crazy and open a bunch at once. You may lower your score by 10 points for each one. Over time, adding cards can work to your favor because the added available credit creates depth of history. But, if your score is at a critical place and you expect that to be important (like buying a house), it may be better to wait.
Carrying a 30% balance over time makes the credit card lenders happy but, costs you finance charges each month. Weigh out your own advantage. Don't ever be late on a minimum payment. A default on one card can bleed over and cause rate hikes on other cards as a result. You can ask a card lender to change your due date to a more convenient time (like end-of-month closing dates).