Building / Repairing / Maintaining GOOD CREDIT

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I monitor my credit reports at all three bureaus pretty closely. Lately because the Barclay's and Discover credit cards reveal my Trans-Union FICO score to me, and my Union Bank credit card reveals my Experian FICO score to me, I monitor those closely too.

As a background to all this, understand that there are three major credit bureaus in the United States. There are equivalent bureaus in foreign countries too, although the credit monitoring / profile system is much more entrenched and thorough in the U.S.

In the U.S. we have Experian (formerly TRW), Trans-Union and Equifax (formerly CBI-Equifax). In principle, these All Seeing bureaus gather and record all creditor/ debtor transactions that happen in the U.S., and maintain a "credit report" or "credit profile" on each of us. These reports include both records of credit granting situations - such as credit cards, loans, etc., and also certain types of public records, such as civil court cases that have gone to judgment (situations where people are sued and a final judgment of the court ordering them to pay a certain amount to a creditor is entered by the court and then recorded with a government entity such as the county recorder).

These credit bureaus also maintain personal identifying information about us, our names, addresses, social security numbers (and in foreign countries, other personal identifying numbers), dates of birth, phone numbers, and limited employment records (usually limited to just the names of current and past employers).

What many do not know, is that these bureaus are sometimes not as all-seeing as we fear (or hope), and many things slip through the cracks. As well, the information recorded on one bureau may not be on another.

Now, naturally when it comes to GOOD credit we want it all to show up on our reports, and show up CORRECTLY, identifying the full amounts we owed and paid back. And when it comes to bad credit, especially judgments, we hope that the bureaus will somehow have MISSED these pieces of derogatory information and NOT recorded them.

For the most part though, these credit bureaus are pretty good at what they do and record the good the bad and the ugly of our credit lives, fairly accurately.

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Monitor your credit closely

Due to some hard fought court battles by libertarian consumer advocacy groups, in the U.S. each of us in entitled to one free credit report annually, from each of the credit bureaus.

What this means is that in the U.S. you may obtain, free of charge, one credit report every twelve months from Experian, and one annually from each of the other two bureaus. So that means - at least three credit reports annually, free.

Additionally, you may obtain a free credit report every time you apply for credit and are denied credit, and actually, if you know what you are doing and know how to manipulate the system just a little, whether you are approved or denied for credit, whenever your credit is run, you may pretty much turn around and a get a free copy straight from the credit bureaus.

I provide tech support on how to get your free credit profiles - to make certain you obtain them from the correct, actual free annual credit bureaus, and also how to obtain your report free EVERY TIME your credit is run by any potential credit grantor, whether granted or denied.

Additionally, if you obtain a credit card from certain companies, you may obtain a free monthly FICO score. Your FICO score varies based on from WHICH credit bureau it is pulled, and because each bureau may contain slightly different information, your FICO score may vary at the different bureaus.

Right now Discover and Barclay's give you a monthly free Trans-Union based FICO score, just for being a cardmember, and Union Bank gives you a free Experian based FICO score.

I do not recommend PAYING for a monthly FICO score, as there are enough free ways to get it. Put it this way - if you are in a position to GET credit, you will be able to get a free FICO score regularly from a creditor who extends you credit. And if you cannot get any credit from anyone, why worry about your FICO score anyway? The information on you credit profile should be enough to tell you why you have bad credit without getting into the microcosmic analysis of FICO score.

But bottom line - DO monitor your credit closely.

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Stagger your free annual credit reports - do not pull all three at the same time

Given that in the U.S. you get one free annual credit report from each of the three big bureaus, I recommend going online and getting one EVERY FOUR MONTHS from a different one. Keep track - so that you rotate the bureaus so that whichever free report you take advantage of in a given month of the year, is the one you may obtain again - free - in a year.

So, for example, if you pull
Experian - in January
then pull
Trans-Union - in May
and
CBI-Equifax - in September

and then back to pulling Experian, a year later, in January again.

This way you get FREE track of all your credit, in a manner in which you maintain a continuous snapshot of everything, without ever paying for it.

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Build up your credit by using it heavily but paying it off quickly

Now there are techniques to repair credit and JUMP start good credit
Repairing Bad Credit and Jump starting good credit - Free EBAY, PayPal, Business and Law Forums - Ebay Suspension, PayPal Limited
that are best discussed in private.

But there are many simple techniques that are simply common sense to maximize your good credit and your good credit score.

One of these involves simply paying off your credit card bills, in full, as soon as they become due - on the first day they are due.

Now first of all, this requires the ability to pay off your balances as they become due. If you cannot do this, then - that is not a bad thing, but at least then pay the minimum payment due on your cards on the first day due.

The REASON it is crucial to make payments at the beginning and not end of the cycle, is that the LONGER your credit profiles SHOW a balance owed on your cards, the greater (higher) your debt to credit available becomes, and the longer this debt to credit available ratio remains on your credit report.

Now, at the same time, UTILIZING your credit is a good thing too. If you have a massive amount available on your cards but NEVER utilize it, then this will show as a very low "high balance" on your credit bureaus as far as credit utilization, and will also count against you. What credit utilization is, is explained below.

You see, owing too much on your cards, for too long, counts against you. But not using your cards at all, also counts against you.
So, ideally:

1. USE your credit cards, to high limit
2. PAY OFF your credit cards quickly, as soon as the bill comes in.

Now, some credit experts believe that you should pay your bill even before it arrives, in other words, keep your balance on a card at a near constant zero so that your "credit utilization" remains low. Your credit utilization means - what % of your credit line on a given card are you using, and what % of your total credit available on all credit cards/lines are you using. In general, the lower this percentage, the better for you, and what you DEFINITELY do not want, is a credit utilization of over 50%, especially of this refers to your over all credit utilization on all accounts.

By the way, one advantage to credit cards like American Express (not the ones with a credit limit, but the ones with no pre set spending limit, such as the AMEX green, gold, platinum, black) is that the balances you owe on these cards is not counted in your credit utilization percentage, because these cards do not have any set limit. (Can't calculate a percentage of "credit utilized" against "credit available" where there is no determined credit limit.)

However, the DOWN side to paying off your balances instantly, before the bill even arrives, is that then on your credit profile the true "high limit" will never show - meaning that, if you constantly pay off your cards without allowing the balance to ever rise above, say, the amount of your latest purchase, then as inquirers take a close look at your credit they will think that this person has never even used his cards for much, never owed much, and so what proof do we have that the guy can even pay his bills?

For example, say you have a $6000. credit limit on a card, and over the course of the month you make eight purchases that total $2300. My recommendation is to pay the bill the moment the bill becomes available to you. That way your credit profile will show (1) that you pay on time, and (2) that you have used this card to a "high balance" of $2300. Some credit bureaus also show a running high balance for what your bill was at the end of each month.

Alternatively, if you were to make eight payments on your account instantly as soon as your purchases are made, as some credit experts recommend, true, your credit utilization on the card would never get to 2300 / 6000 or 38%, but at the same time your high balance notation would never be more than your single highest purchase.

In sum, I think it is important to show potential creditors that you are able to pay off large balances on your cards - not that you have a bunch of high limit cards that you have not even utilized.

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Inquiries ding your credit - apply for credit wisely

Each time you apply for credit, your credit profile from one or more credit bureaus is pulled. And each time this is done, an INQUIRY remains on your credit profile.

Now, there are different kinds of inquiries, but only the inquiries that are initiated by YOU pursuant to YOUR request for credit, are recorded on your credit profile in a manner in which your credit score (FICO) is lowered. Generally speaking, for each "hard pull" (also known as a "hard inquiry") initiated by you, pursuant to a request/application for credit/loan, your FICO score will drop five points.

Also, if you have too many inquiries visible on your credit profile, creditors will see that you are "fishing for credit" and shut you down as well - the old adage about banks, that they love to lend you money when you don't need it, remains true. So, spread out your applications for credit - don't apply for too many cards at once.

KEEP IN MIND THOUGH - that inquiries that are NOT requested by you directly, such as:

1. Periodic reviews from existing creditors (to make certain you are still credit worthy)
2. Inquiries made by companies seeking your business with promotional credit offers

are not counted against your score, and are not even visible on your credit report to anyone except you. Such inquiries are known as "soft pulls" or "soft inquiries."


Now, when you get your credit via the free annual credit report, or because you were denied or applied for credit, that is viewed as a disclosure ("soft pull") and also does not result in a visible inquiry or reduction in your credit score.

BUT BE CAREFUL - not all of the companies out there that purport to monitor your credit will protect your credit score in that way - with some of them, every time you view your credit profile, this "hard pull" will result in a dinging of your FICO score.

By the way, although credit inquiries remain on your profile for two years, only inquiries within the last year count against your score.

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By the way, be sure to use each credit card you have at least once each year - or the card may be closed (which you don't want - if you ever close an account do it yourself so that it shows as CLOSED AT CONSUMER'S REQUEST), or worse - your card issuer may lower your credit line due to inactivity.

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I just helped a client reopen a credit card that was closed primarily because she had not used it for six months. SO, try to use all your cards at least once every six months as annually may not be enough!