5 Steps Toward Healthy Credit

5 Steps Toward Healthy Credit

Self-improvement is a great thing. Becoming a better public speaker can earn you a promotion. Going to the gym regularly can help you lose a few pounds. Best of all, managing your credit better can save you hundreds or even thousands on life's big purchases. Managing your credit is not hard; it just takes time and a little knowledge about the credit scoring system.

While each person's individual credit profile should be managed in its own way, there are five basic things that everyone can do to work toward healthy credit.

1. Be punctual

Pay all your bills on time each month. Late payments, collections and bankruptcies can have a significant negative effect on your credit health. If you need some help with this, consider trying out some of these strategies.

2. Check your reports

Check your credit report regularly and take the necessary steps to remove inaccuracies. Don't let your credit health suffer due to inaccurate information. If you find an inaccuracy on your credit report, contact the creditor associated with the account or the credit reporting agencies to correct it.

3. Manage your debts

It's generally recommended to keep your credit card account balances below 30 percent of your available credit limits. For instance, if you have a credit card with a $1,000 limit, you should try to keep the balance owed below $350.

4. Give yourself time

Time is one of the most significant factors that can build healthy credit. Establish a long history of paying your bills on time and using credit responsibly. You may also want to keep the oldest account on your credit report open in order to lengthen your period of active credit use.

5. Avoid excessive inquiries

A large number of inquiries incurred over a short period of time may be interpreted as a sign that you are opening numerous credit accounts due to financial difficulties or overextending yourself by taking on more debt than you can easily repay. Apply for new credit in moderation and thoroughly research your options before you apply.

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Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

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1 Contribution
22 People Helped

Helpful to 22 out of 23 people

I have a very poor credit score, and I want to be able to afford my own house and I am in the process of cleaning up my credit. The lender that I talked to told me some good pointers on what would raise my scores. 1. is to pay on time. 2. get one credit card and pay on time and pay off every month. 3. pay on small collection accounts. maybe this will help anyone out there. Also only use the card on purchases that you know that you can pay off in a month when u get your statement.

1 Contribution
8 People Helped

Helpful to 8 out of 9 people

I am disputing many items on my credit reports. My scores are between 520 & 560. If chargeoffs are removed like they never existed, how many points will each one affect my score. I have had a good-standing, $1600 limit credit card for a couple years & 2 auto loans in good standing for a couple years as well. All debt has been paid off. Thanks for any advice!

Really hard to since it depends on everything on your credit report.

Review by
CK Moderator

1 Contribution
4 People Helped

Helpful to 4 out of 4 people

if one went through a bankruptcy 8 years ago should they try to get it off their permanent record or wait for the 10-year mark when it will come off automatically? Does it still affect the credit score after 8 years? Thanks in advance!

1 Contribution
4 People Helped

Helpful to 4 out of 4 people

Love credit karma! Until this year, I never took my credit score seriously and it showed. My husband and I have changed and credit Karma is really helping us keep on track, thank you!

1 Contribution
3 People Helped

Helpful to 3 out of 4 people

I was using the credit simulator and I tried to find out what would happen if I had an on-time credit history for 24 months and my credit score projection did not change. This article says that time should improve a score. Nothing I do in the simulator improves my score except getting a mrtgage which my score is keeping me from doing. What's up with my simulation?

Very common for people with high credit and a long credit history since 24 more months does not really change your risk profile.

Review by
CK Moderator

2 Contributions
1 Person Helped

Helpful to 1 out of 1 people

I consigned a Mortgage lone with a good friend of mine of $671240.It is time for my to buy my own House may be in the next ten months. My first Question is that Can i still become a first buyer?,

Second, even though i have learnt that for him to take my name off from this Mortgage he would have to refinance this home but he does not want to do that.

What can i do personal to take my neme off. Mty credit score is between 719-730 at the present.Thanks.

Unfortunately, if you co-signed with a friend, you will have lost your first time homebuyer status. If you were no longer on the mortgage, you might be able to get through a loophole in the Making Home Affordable plan that allows homebuyers who have not bought a home in 3 years to be qualified.

On your second question, there is not much you can do to get yourself off the mortgage. Your friend most likely needed your credit score, your income, or your assets in order to secure the loan. Today’s lending guidelines are more strict and its now even less likely that your friend will be able to qualify for a mortgage on his own. As for your individual situation, since you are technically still responsible for your friend’s home, and unless you make enough to support your friend’s and your new mortgage amount, your Debt to Income ratio is going to be too high for you to purchase your own home. You need somewhere around a 38% DTI (Debt to Income) ratio to be in the running for a loan. So assuming you make $10K/month, all of your debts need to be in that range, around $3,800/month. That is, if your friend’s mortgage, your new mortgage amount, the taxes and insurance premiums, the minimum payments due on any credit card balances, as well as any other loans, student, car, etc. need to be wrapped up around 3,800 and there is a chance you can qualify for a mortgage. Your best bet is to speak to a trusted mortgage professional who can look at your credit report and determine what options are available.

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CK Moderator

Reply by
joltsquish

9 Contributions
3 People Helped

Your likely going to need to get off that loan if you want one of your own.. This is where it gets ugly.. Your friend is blocking you from getting a home... He has to refinance it, like it or not..... Its not an option... Might have to take him to court if he doesn't want to attempt to refinance it..

2 Contributions
3 People Helped

Helpful to 2 out of 3 people

While you're at it, if your credit is really bad but you need a way to build it, check these folks out:

http://www.prbc.com

I saw it recommended in a personal finance book. Basically it's a fourth bureau that works directly with consumers, and they help you track your rent and utility payments. So if you pay those on time, you could feasibly qualify for a mortgage in a year because they've partnered with a mortgage company too. I'm not affiliated with them in any way, I just thought it sounded like a fantastic opportunity. Creditkarma should partner with them. :)

Reply by
joltsquish

9 Contributions
3 People Helped

PRCB might get you a small start but you still will most likely need a secured credit card, a secured shared/creditbuilder loan, a current student loan, and/or a car loan and a real credit score before being eligible for anything significent.. PRCB is an attempt at a feel good credit score.. but noones taking it at face value

Reply by
joltsquish

9 Contributions
3 People Helped

Unfortunately no creditors really take PRCB seriously... You might have some smaller stores in the PRCB marketplace and small loans, but nothing like a real credit score.. 

3 Contributions
7 People Helped

Helpful to 1 out of 1 people

I love it! It is very helpful

1 Contribution
0 People Helped

Good reminder thanks !!

1 Contribution
0 People Helped

Very good advice!!- Thanks

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