5 Ways To Improve Your Credit Score – Lesson 2

August 14, 2008 at 8:43 am · Filed under Credit Scores, Foreclosure Help, Headlines, The Mortgage Market and tagged: acceleration clause, cardholder agreement, cell phone, collection account, credit cards, credit score, debt consolidation, interest rates, new years resolution

Making your payments on time may seem so elementary that it is ridiculous to even bring it up….or is it?

It is no secret that the most important aspect of your credit score is the timely re-payment of debt.  For those who are rolling their eyes at me now, I assure you that some people don’t get it.  There are millions of people who have never been taught about credit, both its uses and dangers.  Most people get their first credit card on a college campus and feel so proud and grown up that a credit card company would choose them for the opportunity to get a first credit card.  Grow Up!!  It is not a privilege to have a credit card when thousands of pre-approved credit card offers are sent out every year to dead people and family pets.  Is it because credit card companies are stupid?  Well, sometimes, but mostly it is because credit card issuers are working on numbers.  The more new accounts they get, the more people spend, and the more interest they receive.  It is a best practice to not use credit cards at all.  But, if you are one that would rather pay interest than earn it, here is how to make the best of it.

Always make your payments on time!  Hidden deep in the fine print of the cardholder agreement that you sign when you get a credit card are the scary terms that no one talks about.  Probably the most damaging is the acceleration clause.  This means that not only will you receive a penalty for being late, but in most cases, your interest rate will be increased.  Depending on the card issuer, this increase may be the maximum allowable by law in your state.  If your payment is due on the first of the month, and you make the payment on the third, you very well may be triggering the acceleration clause and not even know it.

One of the tricks that they use is to not say anything to you about the change at all.  If you are not paying attention to your monthly statement, you could have been paying a 24.99% rate for the last 6 months and not even know it.  it is best to assume that when using credit cards, you are playing with snakes.  If you take your eyes off of it, you very well might get bit.

Something else that may affect you on payments are the less obvious.  Have you ever seen a collection account on your credit for a cell phone bill?  I have, dozens of times.  Sometimes the customer knew about it, and sometimes they didn’t.  How about a gym membership that you cancelled after the New Year’s Resolution wore off?  I seen that one dozens of times too.  In fact, gyms count on it as a source of revenue.

Utilities are also a big one.  Getting your power cut off for lack of payment is not where it ends.  They will also (in most cities) report it to your credit.  The one that may shock you though (it even shocked me) is the number of public libraries that are reporting excessive late fees to the credit bureau.  Video rental stores, insurance companies, virtually any company where you have requested a service and not fullfilled your end of the bargain will now report it to the credit bureau.  Most people don’t find this out until they are trying to make a major purchase, such as a home or car, and at that point you usually have to pay it or lose the purchase you were trying to make.  It is best to stay on top of your credit at least twice a year to see what others see.  Especially in an age where you are 25 times more likely to have your identity stolen than have your car stolen.

Lesson 3 – Credit Inquiries

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