Credit Basics

Credit history can be a factor in people's lives that can have a dramatic positive or negative impact. Many people do not learn about the importance of building and maintaining a good credit rating until it is too late. Today, bad credit and no credit can influence:

Your insurance rates

Your mortgage rates

Your auto loan rates

Your employment opportunities

Obviously, the worse your credit history is, the higher rates you will pay on insurance, auto loans and home loans. In fact, especially lately, bad credit can cause you to be unable to get any type of mortgage or auto loan. It has also become more common for employers to include credit screening as part of their background check when considering a job applicant. In some cases, bad credit history can cause you to not get a job.

The best way to maintain and improve your credit score--FICO--is to pay bills on time and to keep credit card balances paid down below half of the total credit line. Avoiding late pays and avoiding maxing out credit cards are not the only factors that make up your credit score, but they are two of the most important. Other factors that influence credit score are:

Amount of available credit(The higher the credit lines, the better the score

Age of accounts(The longer you pay on your mortgage the better your score

Number of accounts(Generally, people with a mortgage, auto loan and at least one credit card will score better then people with only an auto loan or a single credit card.

If you are in a situation where you need to repair your credit, understand that it will take time. The fundamental basis of having decent credit is to be able to pay your bills on time. Understandably, being able to pay bills on time has been a big challenge for many of us over the past couple of years and will most likely continue to be one. However, once you are able to pay on time, the best option for repairing credit is to get credit cards paid down at least below half of the total credit line and re-establish payments on all other loans that you might have that have not charged off. Most derogatory credit stays on your report for at least seven years, so the best thing to do is to start rebuilding perfect pay history as soon as possible.

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