Common Credit Questions
With today's credit-driven society, it's absolutely essential to stay on top of your financial circumstances. If you get behind on your bills, it's very difficult to catch up. And if you don't catch up, you'll be charged even more on top of the amount that you're already behind on. So if you have good credit, be very diligent about keeping it. Here are five common credit questions, with common sense answers, that could save you many dollars and cents.
How often should I check my credit? It makes sense to stay on top of your credit situation, and the only way to do that is to know what's in your credit file. You should therefore check your report regularly, at least once every year. The Federal Trade Commission states that you have the right to order one free copy of your credit report yearly from each of the three major credit reporting agencies. You can order your credit reports online here.
Which is better to have, lots of credit cards or just a few? If you consolidate a number of cards into one credit card with a large balance, you may end up actually lowering your credit score. Let's say, for instance, that you have eight cards of varying balances, but all at roughly 50 percent of their respective credit limits. To consolidate the debt, you apply for and receive one more credit card with a large limit. You close the other accounts, leaving the one card open. But now, the percentage of available credit that you have in use is no longer 50 percent; it's much higher, perhaps as much as 95 percent. This can actually work against your score.
Additionally, while it does make sense to pay off credit card debt, it may not make as much sense to close the accounts. This is because the general rule of credit card history is that the longer your account history extends, the higher your score tends to be. So it may be a good idea to keep older accounts open, even if they're not used.
I pay my credit card on time, but sometimes I'm late with other bills. Can this affect my credit score? Unfortunately, yes it can. With the advent of the "universal default" provision, which many credit cards now incorporate, if you don't pay or are even late on any bill that you owe, the credit card issuer can raise your rate on the card that you aren't late on. Besides that, many other bills in addition to credit cards can be reported to the credit bureaus, and any negative entry will adversely affect your score.
What should I do if I'm going to be late making a payment? If you think that you'll be more than thirty days late on a payment, the best thing that you can do is to contact your lender immediately. It's often very likely that you can work out an arrangement if you let the lender know as soon as possible. Lenders appreciate a proactive attitude toward your obligations. In addition, it's just the right thing to do.
I usually pay my mortgage on the 10th of the month. It's due on the first, but the mortgage company says it's okay because I have a 15-day grace period. Can they report my payments as late? No, they can't. But you must still be cautious. A debt is considered "late" for credit-reporting purposes only if it's at least 30 days overdue. However, some lenders will begin charging late fees if you are even one day late. Read the fine print of all of your documents.
For mortgage payments, lenders typically provide a grace period because checks may be delayed in the mail and payment days may fall on weekends or holidays. It's still best, however, to pay on time, if not earlier.