How Life Works

Sep 25, 2016
Updated: 9/18/2016
 - Sponsored by Credit Sesame

How Smart People Get Into Trouble with Debt

How Smart People Get Into Trouble with Debt

The troubling fact in today's economy is that according to the Fair Isaac Corp., the developer of the FICO score, one in four Americans have low credit scores.

This means that 25 percent of consumers are having a very hard time securing home mortgages cars loans, credit lines, and even bank accounts.

Are you currently struggling with your credit score? If so, you are most likely making one or more these bad credit mistakes, including:

1. Not regularly monitoring your credit score

2. Maintaining a high credit card utilization percentage

3. Not addressing or fixing errors on your credit report

4. Not writing "Goodwill Adjustment Letters"

5. Only paying minimum payments

Whatever you do, don't get too down on yourself — you can take five quick and proactive steps for rebuilding your credit.

1. Monitor Your Credit Score
In order to improve your credit, you must understand the factors that are affecting your score. Luckily, there are some great tools on the Web that provide free access to information on your liabilities, credit balances, loan interest rates, mortgage, and late/missed loan payments.

One of the most powerful and easy-to-use resources is Credit Sesame. This free service allows for you to check your credit score in minutes and provides a wealth of other important details about your credit file and history.

Don't turn a blind eye to your credit score, but make every effort to take concrete steps to make lasting improvements.

2. Lower Your Credit Utilization Percentage
"Credit utilization" is the percentage of your credit lines you are using at any given time. So, if you have a Visa with a credit line of $1,000 and you use $700 to purchase a TV, you are using 70 percent of your credit line.

Try to keep your credit utilization at under 10 percent. To lower it, either significantly pay down your credit lines and/or ask for your creditors to raise your credit limits.

You can view your credit utilization for each of your accounts by instantly checking your credit score.

3. Identify Credit Report Errors
Never assume that creditors are accurately reporting your credit history. It's common for creditors to accidentally report missed or late payments, which can significantly lower your credit score.

Review your Credit Sesame account. If you identify an error, look through your records and bank statements for proof of payment. Next, call your creditor and ask how you can immediately refute the error.

Definitely check back to make sure the error has been removed; you may have to contact your creditor a second time and insist they clear your name.

4. Submit Goodwill Adjustment Letters
If you are guilty of a missed payment or delinquency, you can ask for forgiveness and possibly have it removed from your credit history.

The secret to success is revealing that you haven't missed a payment or paid late in a long time. Also, you must successfully illustrate that you are making every effort to improve your finances and will continue to do so in the future.

The worst thing your creditor can do is refuse to remove it from your credit report, but you'll never know unless you ask!

5. Pay More Than Your Minimum Payment
Avoid only making the minimum  payment for your credit lines. The faster you pay your debts off, the lower you can push your credit card utilization percentage and the higher you can raise your credit score.

Plus, think of all of the interest you are accumulating. You may have to make some sacrifices and budget more carefully in your daily life, but  you will breathe easier knowing you will one day be debt free.

Don't be paralyzed by your credit score. By assessing your credit score and making some changes, you can determine exactly how to improve your financial future.

Click here to get a free credit score and credit file details from Credit Sesame.

This article sponsored by Credit Sesame Copyright 2016