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Credit issues have a way of creeping up on people. At one time or another, many people face credit problems. And when they do, it can cost them big money:
• Credit card rates may go up into the high double-digits
• Loans may be denied
• For loans that are approved, the interest rates may be higher
• Buying power may be limited
But you can overcome your credit problems! Consider these 7 habits to turn your credit issues in a positive direction!

7 habits to overcome credit issues

1. Pay bills promptly. As obvious as this seems, late payments are a leading reason for credit issues. Paying bills promptly is one of your best tools to begin restoring good credit. Be sure to set aside the time you need once or twice a month to pay your bills.

2. If you’re juggling bills, pay any home loans first. Losing your house to a foreclosure action is a lot worse than having your credit cards frozen. And, your home’s available equity may be a tool to help consolidate your other personal debt—so protect your mortgage above all.

3. After the mortgage, pay the most seriously delinquent bills first. A bill that’s 90 days late is more serious on your credit than one that’s 30 days late. Plus, you risk having utilities cut off and the added expense of restoring them. Be proactive by calling your creditors to let them know when to expect payment. And, explore the option of a debt consolidation loan early on, before your credit issues become too severe to qualify.

4. Don’t spend up to your credit limit. Avoid maxing out or exceeding your credit limits by setting your own “limit” for how much you use each account. Less than 50% of the available credit is a good rule of thumb.

5. Keep using credit—but keep track of it. Don’t over-react to credit issues by closing all your accounts. Having no credit accounts can be as damaging as bad credit if you’re trying to re-establish creditworthiness. You need to show a track record of responsible credit usage. To monitor how you’re doing, get a free copy of your credit report annually from www.annualcreditreport.com.

6. Close or minimize high-rate accounts. The type of credit you use can make a difference. High-rate credit cards or finance company accounts generally aren’t viewed as favorably as a low-rate auto loan, for example.

7. Don’t over-extend yourself just before making a loan application. Most people don’t apply for a mortgage or car loan on the spur of the moment—it’s a planned event. So, don’t go on a spending spree or open a new credit account just before you apply for a new loan. It could lower your credit score.

Credit scores are based on credit reports, which contain your credit history. The credit score is used by lenders to help predict how risky it would be for a lender to offer you more credit.

The most well-known credit score is called the FICO score, developed by the Fair Isaac Credit Organization. While each credit bureau calculates credit scores using its own unique formula, there’s no mystery to the factors that make up a credit score. MyFico.com, a division of Fair Isaac, offers helpful guidelines to explain what goes into a credit score:

• How promptly you pay = 35% of your credit score
• How much of your credit limits you use = 30% of your credit score
  • So avoid exceeding or maxing out your credit limits
• How long you’ve been using credit = 15% of your credit score
• What types of credit you utilize = 10% of your credit score
  • A secured credit card and high-rate finance company loan don’t do as much for your credit score as an unsecured card and low-rate auto loan
• How much you’ve borrowed recently = 10% of your credit score
• Other factors include:
  • Court judgments
  • Tax liens
  • Number of recent credit checks

Credit reports provide a detailed record of an individual’s borrowing and repaying history. Lending institutions use these credit reports to determine an individual’s interest rate and borrowing capabilities.

What’s in a credit report?

Credit reports are produced by 3 credit bureaus – Experian, Equifax and TransUnion (also known as credit reporting companies) – and include:

• Personally Identifying Information – your social security number, current and previous addresses and employment history
• A summary of the number and types of accounts and whether they are in good standing
• Payment history for each account
• Details of accounts turned over for collection action
• Information about past bankruptcy or judgments
• Inquiries made by lenders or other institutions about your credit report

If you have found errors in your credit report, there are ways to correct them. Your credit report provides information on correcting errors in your file.