Your credit record is one of the most important tools used by creditors to assess your affordability and your risk for new credit. It is a collection of information (on an individual) supplied by credit providers to credit bureaus, approximately every 30 days. A credit report will show your:
- defaults (accounts that are more than 3 months in arrears)
- applications for credit
- credit score
If you think that you are still in the market for credit – secured or unsecured – it is a good idea to get in the habit of doing things which build a better credit record.
How to build a better credit record
Building a better credit record essentially means increasing your credit score. A credit score is a number that evaluates your creditworthiness and is based on your credit history, as displayed on your credit record. The higher the score, the more financially trustworthy a person is considered to be.
What impacts your credit score?
According to leading credit bureau, Transunion – the following negatively impacts your credit score and should be avoided:
- Too much debt: Having too much available credit can sometimes harm your credit score. Credit or service providers may feel that you have the ability to spend more than you could potentially pay back. You might want to consider closing a few accounts or asking to have your credit limits reduced.
- Your account balances are too high: High levels of debt can signal to potential credit or service providers that you are spending more than you can afford. It is a good idea to use your credit cards regularly but remember to keep your balances below 35 percent of your available credit limit. If you have balances above 35-50 percent, you could see your credit score start to drop.
- Late payments: Late payments will drop your score. In other words a 90 day late payment is more damaging than 30 days late. Always pay at least the minimum amount on your credit account each month.
- Too many new accounts: Looking for new credit can equate with higher risk if the enquiries are done across many different industries within a short period of time. Opening several credit accounts in a short period of time affects your TransUnion score. The impact from applying for credit will vary from person to person based on their unique credit histories.
- Negative public record information: Bankruptcies and judgments on your credit record is never a good thing. Take the necessary action to get them removed as soon as possible.
Beware of credit fix scams
People are desperate to access credit, and will go to great lengths to clear their credit records.
Fraudsters prey on this desperation when they promise to “clear” someone’s credit profile, and promise to “remove their names from the blacklist”.
Popular scam alerts from “credit fixers” include promises to:
- Get judgements removed from your credit record
- Rehabilitate your credit profile
- Remove your name from the blacklist.
All of the above are normally offered at a fee. These are scams and they are illegal.
No unauthorised company, attorney, debt counsellor or individual can simply remove negative data from the various credit bureaus – regardless of how much you pay them.
Debt review can play a major role in how to build a better credit record
One of the major advantages of debt review, is the fact that once you have completed the debt review programme and paid all your debts in full – your debt counsellor will notify all the credit bureaus and your credit record will be adjusted accordingly.
Debt review allows to develop better financial habits, pay off your debts and become financially free.