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Paying credit cards can seem like such a hassle. At times we often put such things off or simply pay the minimum balance due each month just to keep the collectors off of our backs. It is important to remember, however that the debt is ours to pay…often times with interest! That being said, you do NOT want to wait until you are in the market for buying a home to take a look at your credit report and score. Your credit report can take years to get under control, therefore start NOW! Grab your yearly free credit report and review everything. Make sure that all items are actually yours and seek professional assistance if you are not sure of any charges. Identity theft might also come into play so you want to be sure that you know what your credit report says. If anything is false or incorrect, you have a right to dispute and remove such items. There are laws in place that protect consumers from such threats.
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The next thing to do is to look at your credit score. It is a sum total of all of your financial behavior and stewardship – yes you are graded on your financial stewardship. This is what lenders look at on whatever document you provide your social security number on, such as mortgage application, vehicle leasing applications, renting applications, credit card applications, home security applications, and so on. When applying for such things, as quickly as it seems to take, you are placing separate inquiries on your credit score and it WILL continue to go down until you stop applying. Ironic isn’t it? Here you are with decent a credit score – between 720 and 800+, and you are applying to lease a car or home and yet with each application and credit inquiry, your score goes down a little each time! There is a difference between a ‘hard inquiry’ which will affect your credit score and a ‘soft inquiry’ which will not affect your score. Before providing the completed application, it’s in your best interest to inquire which type of inquiry the lender is pulling. Most times however, it is a hard inquiry bringing your credit score down with each application.
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It is important to remember that your payment history alone makes up 35% of your credit score. This means that any time you miss a payment or are perpetually late; your personal credit score goes down. What does this mean for you? If you are looking to apply for more lines of personal consumer credit or looking into making a larger purchase that requires a lease or inquiry into your credit history, the majority of the final review will be base on how often your pay your already acquired credit on time.
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Since it takes such a long time to credit the perfect credit score, you want to be sure you are executing behaviors that work in your favor. The best I can explain it is that when your finances are going well, use this time to be sure to keep your payments on credit on time if not early. Four to five days early is best, especially if you have any credit established in a business name. Don’t know how to do this? Subscribe for info on one of my upcoming FREE webinars.
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