On St. Patrick’s Day, we celebrate the luck of the Irish. But it will take more than luck to break free from the financial struggles that result from poor credit. So here’s an easy, step-by-step way to take command of your own credit. Not only that, you’ll discover that there is a pot of gold — of sorts — waiting for you if you follow this method.
Credit scores are simply a numerical “snapshot” of our credit habits and financial background. If you make positive changes to your credit habits, they can have a positive impact on your credit score. That, of course, will lead to more access to money when you need it, lower interest loans, lower down payment requirements, and more! Use the acronym LUCKY to help you adopt remember what some of the best credit habits are:
L = Look at your credit reports regularly. At least twice a year, pull your credit reports at AnnualCreditReport.com and go through them with a fine-toothed comb. Make sure that the information reported is accurate, up-to-date and complete. You can get a free credit score by pulling your free Credit Report Card, which will also give you grades for each major credit scoring component.
U = Uncover errors and dispute them. As you review your reports, you may find information listed on the report that is incorrect or doesn’t even belong to you. Dispute these errors with the credit reporting agencies. It is in your best interest to have the most accurate information — only about you! — listed on the report.
C = Clear up overdue items and debt collections . Overdue items and collection accounts can be big strikes against your credit score. Do what you can to take care of these items as quickly as possible: Make payment arrangements, adjust your budget, even take on a part-time job. Although these items may stay on your credit report for a few years after, you’ll have taken a huge step forward.
K = Keep your accounts active but paid off. One of the best ways to positively impact your credit habits (and, by extension, your credit score) is to keep all of your accounts active by using them at least once a month, but never spending more with your accounts than what you can afford to pay off. So pull out that credit card regularly but make sure you pay it off in full and on time each month.
Y = Years matter! They say that “time heals all wounds” and that is true on credit reports. Your credit scores should slowly increase over time as a result of your better credit habits. Sometimes you might see improvements in just weeks or months, though for some negative items it may take a few years before the effects fade from your score. The most important thing is to start today and maintain good habits, and those months and years will only help.
To get a better idea of how your good credit behavior affects your score over time, it helps to monitor your score regularly to help you chart your progress and keep you on track. Sort of like the rainbow to your pot of gold, since better credit can get you better interest rates and ultimately save you a pile of cash.
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