Tag Archives: credit report
How Many Credit Cards Should I Have?
How many credit cards should you have? Some people think that the answer is obvious and you should have as many as you need. The answer, however, is much more complicated than that and involves a number of variables, including your lifestyle, your needs and your employment/retirement prospects.
The secret to financial stability is not about how many credit cards you should have; rather, it’s about how you use them. One important way to make wise credit card choices is to keep a close eye on your credit report.
Reading a credit report is more than just checking in from time to time to see what your current score is. It’s also about understanding what lenders are looking for when they rate your credit-worthiness. Two of the most important items reflected in your credit report are your debt-to-income ratio and your credit utilization percentage. The number of credit lines you carry has a great bearing on both.
Debt-to-Income Ratio
Your credit report will take into account how many credit cards you currently have, but it will also calculate your debt-to-income ratio, which is the percentage of your income that is needed to pay off your debts.
If you’re taking out a loan for a big ticket item such as a car or a home, you need to be aware that many car and mortgage lenders will factor in your debt-to-income ratio when deciding whether or not to approve your loan.
You can calculate your debt-to-income ratio by writing down your entire monthly income in one column and your monthly debt payments in another, then figuring what percentage of your income total is being used to pay off those debts.
Credit Utilization Percentage
Your credit utilization percentage is your debt divided by your credit and makes up 30 percent of your total credit score. If you have an available credit line of $5,000 and you’ve used $3,000 of it, your available balance of $2,000 gives you a credit utilization average of 40 percent, which is 10 percent higher than it should be. Lenders look for an optimum credit utilization number of less than 30 percent.
This is where having too many credit cards can be harmful to your credit score. If you’re tempted to use those available balances, be warned that when those balances increase, so does your credit utilization percentage.
Those Tempting Credit Card Offers
During the worst days of the current economic recessions, new accounts were tremendously difficult to get, especially for those with less than perfect credit. In 2011, this situation began to ease up slightly.
Disputing Your Bad Credit Accounts Doesn’t Have to be Nasty!
When you know that there’s inaccurate information on your credit report, it can really make you angry! There you are, trying to make a living, take care of your family and move on with your life and these incorrect entries are lowering your credit score! Why, you ought to make a letter and complain about this very thing to the collection agencies, the original creditors, and even the credit bureaus! That’ll teach them!
Stop right there — if you play that out in real life, you’re going to actually do a lot more harm than good. You see, disputing your bad credit accounts doesn’t have to be nasty at all. In fact, if you take a more irritated and annoyed tone, you will be at a strong disadvantage. You’ll actually find that it’s a lot easier to get the attention of the collection agency when you correspond with them in a polite, respectful, and direct manner. Speak with an assertive tone — one that assumes that you know exactly what the laws are — and they will be a lot more likely to handle you with respect in return. After all, if you know the FDCPA and FCRA backwards and forwards, you already know how they are to behave.
A lot of people slam collection agencies, and they definitely deserve some negative attention. However, sinking to their level is not the way to really get what you’re looking for.
Avoid talking about these accounts on the phone. You don’t want to be tricked into affirming that the accounts are yours when you know that they aren’t. It’s only going to cause problems down the road for you, and who really wants to go through that?
Correspondence via the postal service is really the best way to get your dispute sorted out. Make sure that you use a trackable service like Certified Mail so that you really get to know what the score is. This will also let you set better deadlines so that when it’s time to take the next step in your credit repair adventure, you’ll know just what to do.
If you need a forum to get your tensions out, there are plenty of personal finance, credit, and credit repair forums that will be more than happy to help you out. It’s just a matter of deciding how you will behave. You can’t control what the collector on the phone says to you — you can only control what you say. And once you get marked as someone that is more than happy to get loud and crazy, you will not be able to really change it without doing a lot of damage control.
Don’t put yourself at a disadvantage and delay your arrival at a balanced financial life — there’s no need for that at all!
