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Credit Tune Up Time

January 3, 2009

When was the last time you checked your credit? And no, I don’t mean when was the last time you received that pesky letter denying you credit! The average American has approximately seven credit cards — paying only the minimum amount (as low as 2% of the balance). It’s no wonder over 35 million Americans are in financial debt up to their eyeballs. If this is you, it’s time to break the cycle.

First, you should get a copy of your credit report (the listing of all the information in your credit history). Everyone is entitled to a free annual credit report so there are no excuses.

You may be surprised to see what is on your credit report. The key is to try to correct any mistakes, or work out payment plans/settlement offers for the delinquent creditors listed on the report.

Get to know your credit score (also known as your FICO score). This is the number used by lenders to determine if they will extend credit to you. Although it’s not free, knowing your credit score will help you understand where you are and where you need to be. Credit scores range from 300 to 850, with a score of 700 or above qualifying for some of the better interest rates.

How is your score determined? It’s based on the following 5 factors:

  1. Payment history
  2. Length of credit history
  3. New credit
  4. Types of credit used
  5. Total amounts owed

The goal is to limit your credit cards to a manageable number (like two or three). Also, try to use cards, like American Express, that require you to pay off the entire balance each month, and then use the other credit cards for true emergencies.

For a copy of your free credit report, visit Annual Credit Report

To get your credit score, visit one of the following websites:

  • My Fico
  • Equifax
  • True Credit
  • Experian
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