If the years 2006 to 2008 were difficult, expect 2009 to be harder as the US struggles to rebuild its shattered economy. Now, more than ever, monitoring your credit report and free credit score are important. How do we survive and protect our credit standing in this economy without falling into bankruptcy or foreclosure? Here are a few tips: Pay off your credit card balances
This is a major priority. Make sure too that you pay off more than just the minimum every month. Lenders are tightening their policies. Paying off just the minimum amount sends a warning signal to the credit company that you may have financial problems in the future, and that your balance may keep growing. If you pay off your balance in full each month, your credit score will not suffer. Remember that the amount of your debt accounts for 30% of your credit score.
If you need to charge a big ticket item to your credit card, look for deals with zero interest rates. For small ticket items, pay in cash if you can to avoid adding on to your existing balance. Cut down on your expenses (dinners out, shopping, movies, etc.). Use the money you save and add it to your payments.
Study your credit card statements and familiarize yourself with any changes
Expect credit card companies to raise interest rates this year, especially if you have a low interest rate and/or pay only the minimum amount. Study your statements carefully for information on increased interest rates and monitor your free credit score to see its rising/falling patterns. To avoid being affected by higher interest rates, keep your credit card balances low or pay them off in full.
If you have multiple credit cards, take a moment to line them all up side by side, arranged in order of highest to lowest interest rate. The card with the highest rate will be the first one that you should pay off first. Each month when you pay your cards, pay more money on that first one to bring the balance down substantially. Then go on to the next card. By reducing your expenses so that you have extra money to use in paying more than the minimum amount, you can increase your free credit score instantly.
Work to increase your credit score
The minimum credit score considered ideal is now 720. The only way to increase your free credit report score is to make sure your score doesn't make lenders nervous.
Cut down on the expenses that you are charging to your credit card, and pay off your balances on time. Double check your credit reports to make sure that all the information is updated and accurate. Periodically compute your debt-to-credit ratio on all your credit cards, and work on lowering your ratio on each one.
By containing your unnecessary expenses and being diligent in your credit payments, you can avoid having lenders increase your interest rates and thus improve your credit report and free credit score. You'll find more useful advice on your free credit report and score on our website, and find more ways to protect your free credit score in this economic recession.
Jeremy Englewood is a credit manager and writer with over fifteen years' experience in the banking industry. His sensible and practical advice on personal finance topics have provided inspiration to people who want to establish or repair their credit. Read more of his articles about getting your free credit score and other credit repair topics to find ways to improve your credit and be more attractive to lenders.
