The Basics of Credit and What You Need to Know

Most people don't know what their credit score is or what is on their report. This is dangerous and the bad part is that those that do know probably don't understand their credit all that well. If your score is lower than 650, then there is definate room for improvement and if it is below 550, then you need a lot of help. Here are some tips to help you understand your credit better.

First, did you know that if you pay on your credit cards on time, but have a balance that exceeds 25% of your credit limit, it actually hurts your credit. It shows financial responsibility when you carry a low balance on a credit card and pay it off every month. When you run it to its' limit or close to it all the time and make minimum payments it shows that you are not very responsible with your finances.

Second, you actually hurt your credit when you have it pulled too many times. This is based on a 90 day period so if you are car shopping or shopping for some other type of financing, then your credit is being pulled and it will drop as it gets pulled more. The best way to deal with this is to pull it once yourself and take a copy to the financial institutions and only let one pull your credit when you are pretty sure you are going to be approved and use them.

Last, if you have negative items on your credit you need to get rid of them. It is better for your credit to pay off 5 negative items that are $100 each than to pay off one that is $2,000. This is because the more negative items you can eliminate the better off your credit will be and the less negatives there will be on your credit. This is a great way to start repairing your credit and taking care of some very small debts.