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The Importance of Good Credit Standing

By Karen Anderson
Published: Tuesday, November 3rd, 2009

The saying “money makes the world go round” may not be as true nowadays. As we all know, the use of monetary currency is now being displaced by the increasing use of credit. We finance our homes through mortgages and obtain loans to pay for our college education. Especially with the financial crisis we are experiencing, we do all these transactions through the use of credit cards. So perhaps it is more accurate to say that “credit makes the world go round” where credit report tips have become very valuable.

Since we are much dependent on credit, it is therefore of prime importance that we maintain a good credit standing. Enter the credit report which is a record of our credit activities or all our transactions by means of credit. Our credit report is what banks, retailers and finance companies primarily base their decision on whether we are to be granted a loan or not.

Maintaining a good credit record is the cardinal rule among all the credit report tips. We could do this by improving our scores and credit standing. Although we cannot avoid negative information in our report, we can surely offset this by a positive credit standing.

Paying on time is a big plus in our report. In a way, this informs our would-be creditors of our seriousness and commitment to all our transactions. This tells them that we are responsible and trustworthy individuals who are worth investing in. In the same vein, we should therefore repay any accounts that are in collections. Because collections are considered danger signals by lenders, then we should be quick to repair the damage by paying it as soon as we can.

Credit report tips often cite the importance of having only a few accounts. The ideal number is from two to four. Too many accounts with available credit may provide the impression that we are too risky to invest on. This is because available credit is often viewed as potential debt. Too few accounts on the other hand could be seen as a lack of capacity to pay. Old accounts are better kept active. This is because lenders favour stability and thus, the longer the credit history with an account, the better.

Of course, as much as possible, we should avoid having maxed out accounts. One of the credit report tips to be kept in mind is keeping our balance at 60 percent of our credit limit. This tells our creditor that we are able to operate within our means. Moreover, it also reflects sound consumer behavior.

Finally, we should avoid excess credit applications. We should remember that each time we apply for additional credit or loan, our score decreases. Thus, we should only apply for them when we truly need it.

By following these credit report tips, then we are sure to improve our credit score and standing. This not only eases our financial obligations but also allows us to easily obtain credit or loans whenever the need arises.

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