Credit Report, Credit Score, Taxes & ID Security
For some people, credit is a useful financial tool they can use to improve their wellbeing. On the other hand, most people don’t know how to use and manage their credit properly, leading to their financial downfall. To make sure you clearly understand how your credit can make your life better, here at Market Pro Secure®, we have decided to come up with this guide to give you all the essential information about credit and what you can do to make the most of it. The main goal is to point out how important it is to use your credit wisely.
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What is Credit?
Credit is a sort of arrangement that you make with a credit lender, which is most commonly a bank. This arrangement allows you to buy something now and pay for it later. If you see a car that you can’t afford to buy for cash at the moment, you can use a credit to buy it and pay for it at a later date and according to the arrangement with the credit lender.
What is Credit Score?
Just as your credit is important, there’s also one more thing to think about – credit score. A credit score is what defines your life today. It tells lenders, employers, and businesses how responsible you are when it comes to managing your debt, paying bills, and loan payments. Based on your spending habits and responsibility, the credit bureau rates you and your performance.
We can’t emphasize enough how important it is to understand that credit affects almost every aspect of your life. Every business will use your credit score to decide whether they want to work with you or not. It’s what makes you trustworthy. It’s safe to say that your credit can be a powerful tool or something that will be your downfall. If you maintain a great credit score, you can get a loan or a credit card with a lower interest rate, but if your credit score is bad, interest rates will be much higher.
Why Does Credit Matter?
Credit determines the quality of your life, and it impacts almost everything you do. If you want to buy a home, you need a good credit score to do it. A bad credit score could be a huge obstacle when getting a mortgage and a mortgage loan with a good interest rate.
On the other hand, a bad credit score might be a problem that could prevent you from getting a mortgage at all, simply because lenders will check your credit before they do anything. It’s almost the same if you want to rent a place, as landlords like to check your credit score to see with whom they’re dealing with.
Your credit is important when you’re trying to find a better job, as well. If your credit is bad, most employers will choose not to hire you. It also affects your insurance terms. The premium will be much higher with a bad credit score. Even telephone companies check your credit score before you can enjoy their services.
Here’s the catch – although it may seem like the credit score is out of your hands, it isn’t. You alone are the main factor determining what your credit score will be.
Actions Determining Score
How you manage your credit score defines the quality of your life. If you pay attention to the following actions, you can improve your credit score:
- Pay on time – most people fail to realize how important it is to pay bills on time. Here’s a simple fact – paying on time makes your credit score better. The more you pay off, the more it goes up.
- Know your debt – knowing how much you owe at all times is essential to making your score look good. Your score depends on how much credit you’ve already spent, a card balance, a loan, and everything else related to this sort of thing. If you’re neck-deep in debts, your credit score will only look bad.
- Credit history – if you have a long credit history, that could help you improve your score. If you have been consistently making loan payments for more than three years, that will look good in your credit report.
- Type of credit – the type of credit you have is very important. If you have $10.000 credit, that’s much better than a $1000 credit. Higher credits are valued differently.
- The amount of credit you have – if you have five cards, your score will go down as you’re exposed to the risk of creating more debt.
One of the best ways to repair your credit is by hiring a credit attorney to help you. Credit repair attorneys provide a wide range of services such as:
- A thorough review of your reports
- A full evaluation of your credit history to find the best way to improve your score and fix any potential errors
- Negotiation with reporting agencies to clear your credit report from any negative items such as foreclosures, charge-offs, and late payments
- Coming to terms with your credits and reasonable settlement amounts
- Taking care of all legal aspects in case a creditor files a lawsuit against you
Most people aren’t even aware of the common tax problems such as:
- Failure to pay payroll taxes
- Tax liabilities and what happens if you don’t have the funds to pay on time
- Missed tax filings
A professional tax service can help you cope with these problems according to your budget. Working with a tax service professional allows you to review your prior tax years to identify any irregularities that might negatively impact your credit in the long run.
These experts will ensure that your tax filings are properly submitted on time, as well as give a clarification about everything you need to know about your tax record and tax liability.
Your credit report matters greatly. That’s the first thing creditors and lenders will look at when deciding whether to lend you money or not.
Your credit report provides details on things like your personal information, score, credit history, spending behavior, how often you pay your dues, public records like liens, and credit report inquiries.
More importantly, your report tells lenders what your credit risk level is. To put it simply, your credit report tells lenders and other similar institutions who you are as a borrower and how much of a risk you are in terms of getting a loan of any kind or a credit card.
4 Pro Tips to Build or Repair Credit
The sooner you start building your credit, the better. It’s also good to know that you can repair credit if it’s already bad. These tips should improve your financial awareness and help you understand how doing your research can help you weigh your options and make all the right moves to make your credit look good.
1. Get a loan to build your credit
If you want to start building credit, a personal loan might just be a great way to do it. Many credit unions give such loans, and if you pay it off with no problems, that’s an excellent introduction to building good credit.
2. Credit card is an additional security
Getting a secured credit card is an excellent way to start building credit and prove your trustworthiness as a responsible payer. However, it’s essential that you understand the importance of choosing the right credit card. Aim for the one without costs and fees that exceed your budget.
A secured card (explained) allows you to borrow the means that you can use as a loan to buy the things you need. To pay that loan back, you need a cash deposit as a backup. If you regularly pay it off, that will look great on your credit report. It’s vital to understand that credit cards demand you to be very careful about how you’re using them. Make sure that you don’t spend more than you can afford and use your card only for emergencies.
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3. Pay your own bills on time
Your bills, like utilities, your phone, and rent should be in your own name. Pay what you owe on time. You can get a credit to pay your rent as credit bureaus approve credits for such purposes. Just make sure you understand the terms to avoid ending up paying high fees for no reason.
4. Credit utilization
Credit utilization refers to the percentage of your credit that you already used. Ideal credit utilization is anything below 30%. This is one of the best ways to boost your score, but it’s important that you have the cash to pay for what you already used to make sure your credit utilization is below 30%.
If your credit utilization is above 30%, you need to reduce it and avoid charging too much and pay down your credit card balances. There are additional options also:
- Getting a new card – while you should keep your card numbers at a minimum to avoid owing more than you can afford, getting a new card provides more available credit. This could be a solution to increase available credit if there’s a need to do so.
- Increase your credit limit – there’s always an option to increase your credit limit if the need calls for it, but that depends on your card issuer. If you have been paying your debts on time, there shouldn’t be any problems with increasing your limits.
- Pay your debts before your payment due date – if you make payment a few days before the card issuer reports your balance, this could lower credit utilization.
Additional Readings: 23 Dos and Donts for Your Healthy Score