5 Easy Mistakes That Will Damage Your Credit

Building a solid credit history is one of the most important things you can do from a financial perspective. By doing so, you'll be able to borrow money more easily in the future and, more importantly, be able to qualify for a lower interest rate when buying a new home or car. Thus it is important to know what things will quickly ruin your credit if you are not careful. Here are the five easy ways to damage your credit:
Closing credit card accounts. By closing credit card accounts, you reduce your amount of available credit. A third of your credit score is a measurement of the amount of debt against your available credit limit. If you have to close accounts, make sure they are your newest accounts, as long-term accounts help bolster your credit score the most.
Not using your credit cards. Another easy way to ruin your credit score is to stop using your credit cards. Instead, use each of your cards at least once or twice a year. The amount doesn't matter; you can simply fill up your car with gas or buy a pack of gum. By keeping your accounts active, you insure ]the credit card company will continue to report your information to the credit bureaus and keep your account open.
Running up high balances. According to Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, "FICO does want to see a lot of credit, but it would rather see many low balances on several cards rather than one large balance." The closer you reach your limit, the higher your debt utilization ratio is-a large factor in determining your credit score, which can sting your credit score if you're close to maxing out your card each month.
Applying for new credit cards often. Applying for a new store credit card every time you set foot in your local mall is not a good idea. New credit accounts lower the average age of your credit history, and each application triggers a hard inquiry on your credit, which slightly dings your credit score. So, don't fall for a clerk's pitch to get you to open a store credit card by offering a relatively small percentage off your purchase.
Ignoring or missing errors on your credit report. Check your credit report at least once a year and have the credit bureaus fix any inaccuracies. You can visit AnnualCreditReport.com to get the free annual credit report consumers are entitled to. If you find errors on your report, don't assume they will get worked out eventually; it is up to you to contact the bureaus and get it straightened out.

7 Characteristics of Debt-Free People

Family #1 manages to pay off $40,000 in debt in two years on a $35,000 annual income. Family #2 makes $100,000 a year but can’t seem to make the slightest dent in the same amount of debt.
Why is that?
Obviously, the second family has a spending problem. They make plenty of money—more than enough to pay off that debt in two years. But they have so much money going out, they can’t keep their head above water. Whether it’s in the form of an overbearing mortgage, credit cards, a hefty car payment or just making poor choices like eating out every night, their debt keeps them from making progress.
So all of their income gets sucked up by other stuff, which leaves them making minimum payments on their debts and never gathering any momentum. It’s a difficult, stressful way to live.
At some point, people who become debt-free decide that enough is enough. Their old lifestyle wasn’t working, and they’re ready to make some serious changes. It’s like they have a personality change, but that’s not what really happens. All they are doing is rediscovering aspects of their personality that have always been there.
So what are some of these traits of people who get debt-free?

They are wise.

People who decide to ditch debt for good realize that debt isn’t a tool. While their FICO score may go down, their net worth goes up. They treat debt like it’s a skin disease—which isn’t a bad idea. Don’t you wish you could wipe away debt with a little Benadryl cream?

They are patient.

Someone who really wants out of debt can walk right past the shoe aisle or the flat-screen TV aisle without blinking. Why? Because they know all of that stuff can wait. Impulsive, impatient purchases are debt’s best friend.

They are confident.

People who are getting out of debt don’t care what others think. You know you’re on the right track when your broke friends are making fun of you. Getting out of debt can require drastic lifestyle changes, which means you’ll never succeed if you aren’t mentally prepared and confident in your decision to find financial peace.

They are goal-driven.

No-brainer, right? Getting out of debt is a goal in itself, so of course people who want to get out of debt are goal-oriented. But the catch here is that these people do more than just set goals—they map out how they plan to get there. That’s what Dave’s Baby Steps are all about—small goals that lead to the one giant goal of being debt-free!

They are responsible.

Getting out of debt takes a sense of responsibility and maturity—two traits that match up well with patience. And maturity has nothing to do with age. Some 50 year olds still treat money the same way they did when they were 20. They just have more of it now. When you’re responsible, you want to get out of debt as fast as possible so you can begin saving, putting money into a college fund, investing, and paying off the mortgage early.

They are not materialistic.

Becoming debt-free isn’t about stocking a garage full of cars and living in an eight-bedroom house. The purpose is to change your family tree for generations to come, helping others along the way. Materialism can affect any of us—rich or poor. It’s all about how much importance we place on stuff.

They are willing to make sacrifices.

Eating out. Cable. Going to movies every week. These are the types of things that might have to go while you’re getting out of debt. But keep in mind: Budget cuts are just temporary. When you’re debt-free, you can begin slowly adding those things back into your lifestyle.
The bottom line? You have to be motivated and do something about it over time.
If you want to get out of debt, you can get out of debt—no matter how much money you owe. Even if you don’t think you’re particularly strong in all of these characteristics, you’ll be amazed at how your perception of “wants” and “needs” will change once you start the Baby Steps.
When you’re motivated, passionate and even a little angry, you’re more than willing to do whatever is needed to find financial peace. Everything else will take care of itself.
What are characteristics you’ve noticed in debt-free people that you’d like to mimic? Leave a comment to share your insight.

Real Estate Appraisals - Ten things most people just don't understand about them

Most of us will have a real estate appraisal done at some point in our property-owning lives, and yet, as common as that experience is, there are many misconceptions about what an appraisal is, why one is needed, and how truly it reflects the value of our homes.

Let's take a look at some basic questions and some common confusions about those appraisals:

1. What is an appraisal?
2. Are there different kinds of appraisers?
3. Why get an appraisal?
4. The different types of home appraisals
5. Who owns an appraisal?
6. What's the difference between appraisal and assessment?
7. How long is an appraisal good for? 
8. Appraisal?  Home Inspection?  And the difference is?
9. The final estimate of value
10. Don't like the appraisal?  Not fair, not accurate?  What you can do 

If you have any questions that are not covered by this article, I'll be happy to answer your specific questions in the "Ask an Appraiser" thread in the forum.

1.  What is an appraisal?  

It is an estimate of value based on data gathered by the appraise, a process that  is done through an inspection of the subject property, then comparing that property  to recent sales of  similar houses located in like neighborhoods, as close to the subject property as possible.
Before we move into a detailed explanation of the inspection, data gathering and reporting aspects of an appraisal, let's look at more information.

2.  Are there different kinds of appraisers?  
A residential real estate appraiser starts out as an apprentice, taking basic required appraiser coursework and working for two years under the direct supervision of a fully licensed appraiser.
A licensed appraiser covers single family homes up to a million dollars and can also appraise multi-family buildings up to four units.   A certified residential appraiser does those too, but also deals with properties over $1M.  A certified general appraiser can do both residential and commercial properties and is often called on for appraising complex properties.
"I have an in-home business - a daycare.  So, do I have to get a commercial appraiser or can a residential appraiser do my appraisal?"  Absolutely.  We'll talk more about this in a future article.

3.    Why get an appraisal? 
If you are buying or refinancing a home, the lender will want an appraisal done as he needs an impartial, professional opinion of value on the property to protect his equity in the property.  If you default on payment, the lender can be assured of recouping the value of his loan to you.
If you're thinking about selling your home, you may want an appraisal to get an idea of the home's value before talking to a realtor or attempting a for-sale-by-owner.  Appraisals are also done in divorce situations and for estate planning and  settlement purposes.
We usually get a surge of requests just after a town has done a property tax revaluation, as people question their steeply increased assessments.    Because the purpose of the appraisal is key, we work under somewhat different guidelines when doing an appraisal for a lender versus doing a private one for a homeowner, an attorney or an accountant.
"My husband and I are getting a divorce.  Should I have my own appraisal done?"  Wise idea, although ideally both your husband's and your appraisal should come in at similar values.   BUT, this raises an important point:  an appraisal is done under the direction of the person ordering it; thus, your husband may instruct his appraiser that he is looking for a conservative value, while you might want your appraiser to look at the high end of the value range.

4.  The different types of home appraisals
While appraisals requiring both an exterior and interior inspection of the property are the norm, an
exterior inspection only, called a drive-by, may also be ordered.  Obviously not as comprehensive, a drive-by is likely to be used when there's little question about the value of the home supporting the loan amount requested.

5.  Who owns an appraisal?   
This is one of the trickiest and stickiest areas we deal with.  The person (or company) ordering the appraisal owns it, and all the information contained in that report.  We cannot release any of that information to anyone else - period -  without written authorization from the orderer.

"But, wait a minute, I paid for the appraisal.  And now you're saying you can't even tell me what the final  figure is?"  That's right.  We often get the homeowner who wants the house and the broker who wants the sale calling to see if the property appraised, came in at the value necessary.  We absolutely cannot release that information to anyone but the lender, and then the lender can share the appraisal with the client, the realtor, etc.
"My deal feel through with lender ABC, and now I'm going with XYZ.  Would you please send them a copy of your appraisal."   Nope, can't do that.  ABC owns that appraisal and it cannot be re-assigned.
6.   What's the difference between appraisal and assessment? 
First, these two types of home valuation are done for different purposes and within different time frames.  Assessments are done on a town-wide basis usually for purposes of equitably levying taxes.
Revaluations of a town's residential properties, in our home state at least, are mandated every ten years to reflect ongoing market factors  and new trends in the values of new and older homes, waterfront properties, condominium projects, even the newer age-related (Plus 55) communities.
An appraisal focuses on a specific property and ideally pegs its value to similar houses that ideally have sold within the past six months, and which are within a mile of the subject property.  Needless to say, those parameters aren't always workable.
For example, when we appraise a multi-million dollar property with deep waterfrontage, we may have to go way up and down the coast of Maine to find truly comparable properties.  And of course the same applies when we're appraising homes in small  rural towns that may not have seen many home sales in the past year, let alone of houses like the subject.
Second, the final figure in an assessment may only be a percentage of the total value of the property.  What does that mean?  An assessment ratio means that the figure your hometown places on your property may only be 80% of what was determined to be the fair market value when the valuation was done.

"The town has my house assessed for $100,000, yet your appraisal came in at $275,000.  How can that be?"  Well, the assessment could be based on seriously outdated figures, especially considering the hot market and rapidly accelerating values of the past few years.  And, the assessment may only be a percentage of the originally determined value.
An appraisal is a more accurate reflection of what you could reasonably expect to sell your house for in today's market.

7.  How long is an appraisal good for? 
It can be used for a lending decision up to a year after completion, but in today's challenging real estate environment, a lender might not want to go over six months.  But, that can be handled through a re-certification of value, so that the borrower doesn't have to pay for a whole new report.
It is important to note here that an appraisal's estimate of market value is always stated as of a specific date, the date the property was physically inspected.
"For Pete's sake, the new garage is almost done, the materials are all here,and the appraiser could certainly see that."  Homeowners really struggle with this one, especially if they're building a new house and those last little things aren't quite done at the final inspection.  They want us to consider it, report it, done based on their good intentions.  Wrong!
Legally, we must say only what we see when we're seeing it.   It's a snapshot of the property as it is at that time, period.   Suppose there's a fire, a flood, or the contractor walks off the job... it's very easy for a home's value to change drastically in 24 hours.

8.  Appraisal?  Home Inspection?  And the difference is?  
Big, very big!  For an appraisal, we look at things that may present health or safety issues such as a cracked foundation, exposed wires or broken plumbing.  Our reports include only "readily observable items and surface observations."
While we make sure there is running water and a functioning heating system, we don't test those mechanical systems, and we don't make recommendations beyond repairs needed to address any observable health/safety deficiencies. 
Home inspectors and appraisers have very different licensing requirements, in states that even require a license for home inspectors!

9.  The final estimate of value
This is the bottom line, the only line a lender, broker, home seller or others really care about, the final figure for the estimated market value of the property.
While we appraisers have been accused of reading chicken innards to arrive at that figure, we have do have clear, consistent guidelines we must follow, with professional discretion of course.  Appraisers countrywide use a standard forms and the most common type of report for a single family home is the 1004, developed by Freddie Mac and Fannie Mae.
Because these two entities are the biggest mortgage lenders/backers in the country, they've determined the industry's standard reporting criteria.

10.  Don't like the appraisal?  Not fair, not accurate?  What you can do 
Ask questions and discuss with the appraiser what you don't understand or what you believe are discrepancies, errors.  We're not infallible!  (Sorry, guys, I know that'll come as a shock!)  But, accept, too, that the appraiser approaches things from a very different perspective than the broker, lender or homeowner does, and that's our job!
"The house right next door sold two months ago for $23,000 more than the value the appraiser put on our house, and we have a two-car garage that house doesn't have."   Ahhh, yes, we do hear this frequently.  But, that neighboring house may have substantially more space, an updated kitchen/baths,  a finished basement or any number of other amenities that offset any value the garage would add, differences that aren't perhaps obvious at a glance.
"I had an appraisal done and the jerk didn't even count the family room, two bedrooms and bath in the basement!"  So just what do we appraisers look at and look for when we inspect your house?  How do we compare your house to others?  How do we decide how much an extra bay in the garage or an updated kitchen is worth?  Stay tuned!  In my next article, I'll detail the process.  And tell you why those basement rooms don't count!
If you have any questions that are not covered by this article, I'll be happy to answer your specific questions in the "Ask an Appraiser" thread in the forum.

Don’t fear the small mortgage lender

Mortgage lenders come in all sizes, ranging from RBC – the biggest in the country – to tiny wholesale lenders and credit unions.
When it comes to entrusting a company with your biggest debt, odds are, name recognition matters to you. Consciously or subconsciously, people gravitate to well-known lenders partly because there’s a feeling of safety in “big.”

Even when a smaller lender has tantalizing rates and the best terms, homeowners sometimes tend to avoid it if they don’t know the name. An oft-cited reason for that is fear that the lender will go out of business. And that is certainly not unprecedented.
If we’re talking about “prime” lenders – i.e., those catering to more creditworthy customers – the list of extinct lenders includes companies like Abode Mortgage, Citizens Bank, Dundee Bank, Maple Trust and ResMor Trust. Mind you, most of these lenders were purchased by others.
Just recently, we buried another lender. FirstLine, once one of the biggest mortgage companies in the country, closed its doors Tuesday after 25 years in business.
People worry about lenders closing down for one main reason: they’re scared the lender will force them to repay their mortgage early. In reality, however, that rarely happens with prime lenders.
The bigger risk has been with subprime lenders. In fact, some subprime borrowers have even lost their homes in cases where they couldn’t refinance elsewhere after their lender shut down.
But if you’re a qualified borrower with provable income, do you really need to be worried if your lender goes out of business?
“Not at all,” says Boris Bozic, president and chief executive officer at Merix Financial.
“I always find it fascinating that people are concerned about smaller lenders,” he adds. “We’re not deposit takers. We’re giving money, not taking money. The risk is all ours.”
Many second- and third-tier lenders get their funding from large financial institutions and that funding is fairly stable, Mr. Bozic says.
“Even if a company were to run into financial difficulties, the vast majority of the time there are backup servicers in place.” This sort of contingency planning is almost always required by the parties funding a lender’s mortgages.
If a lender were to close, Mr. Bozic says another financial institution would simply take over the mortgage.
When a lender sells your mortgage to another party, you just keep making the same payments like nothing happened – albeit to a different company, in some cases. The new lender is generally required to honour the terms of your old mortgage contract, Mr. Bozic says.
The one thing that will change is the renewal offer you receive at maturity. Generally, the new owner of your mortgage will be the one making your renewal offer. That could be good or bad depending on how competitive the new lender is. But smart consumers always shop their lender’s renewal offer anyway, so this isn’t a major issue.

Overall, the probability of a lender disappearing is low. On its own, it’s not enough reason to avoid a less prominent company.
That’s especially true when the lender has the best deal in the market – which is the case with many smaller lenders today. If you can find a 0.10 percentage point lower rate, you’ll save roughly $1,200 over 60 months on a standard $250,000 mortgage.
If you’re interested in getting the best rate possible, you need to be open to saving money with a smaller mortgage company. Just be sure to get independent advice so you can sidestep the ones with onerous contract restrictions. Examples of those include fully closed terms, costly penalty calculations, porting restrictions, refinance limitations, and so on. Some lenders have rather unpleasant fine print, but that’s true for micro and mega lenders alike.
There are certainly reasons to choose a major bank or large credit union for your mortgage, including branch accessibility, integrating your mortgage with your banking or credit line, and access to other financial products. But it’s rarely necessary to shun lesser-known lenders for fear they’ll close and leave you stranded.

6 Ways You Might Be Hurting Your Credit Score

If you've been trying to boost your credit score--which is a good idea, since people with higher scores tend to pay lower interest rates on loans--you might be going about it all wrong. It turns out that many people don't know just what helps, and hurts, their credit scores. Here are six ways you might be accidentally damaging your score:


1. Avoiding credit altogether. While living a debt-free life sounds like a good idea, it can actually make it harder to take out a loan when you want to. That's because lenders look for experience with managing debt--they want to see that you can make consistent, on-time payments each month--before deciding whether or not to issue you any more of it.
 [The Dangers of Avoiding Credit]

2. Comparison shopping. While checking around for the best price is a savvy move in theory, in practice, it can ding your score. When you call different lenders to check on mortgage rates or auto loans and they issue you a quote, they first check your credit history with the credit bureaus. That can look like you're preparing to take on too much debt, which concerns lenders. While the impact isn't huge, it can hurt people with limited credit histories more, because they don't have much experience to balance out the negative impact from the credit checks.



3. Closing accounts. After paying off a credit card debt, you might be tempted to shut down the account for closure. But that move can actually hurt your credit score, because lenders look for experience with long-held accounts. If you've had that credit card for a long time, consider hanging onto it even after you pay it off, because it reflects well on your ability to manage credit over time.

4. Lowering your credit limit. While you might want to lower your credit limit, especially if you share a card with someone you think might overspend, such as a spouse or college student, to prevent a card from racking up a huge bill, think again, because lowering your credit limit can hurt your credit score. That's because you appear more credit-worthy if you are using only a small portion of your overall available credit.
In fact, if your total debt on a card approaches the credit limit level, then your score can get dinged. People with the highest credit scores tend to use about 10 percent of their total credit limits.

5. Opening up a retail card account to snag a discount. It might sound logical to open up that department store card so you can get the 10 percent discount on your purchase--but doing so could hurt your credit score. That's because opening up new accounts can set off a red flag that you're taking on too much debt, which can send lenders running in the other direction.

[Why Seniors Are In Trouble With Credit]

6. Maintaining a small credit card balance from month-to-month. Making only a minimum payment on a credit card, or paying anything below the full amount due, leads to more debt along with interest and fees. But some people carry that debt anyway, because they erroneously think it shows they can manage and maintain their accounts. To lenders, though, it can just look like the borrower is getting in over his head, which can eventually trigger higher interest rates on the account. So pay off that monthly balance whenever possible, and as soon as possible.

Given all these misconceptions, it's no wonder that credit reports can be extremely confusing. In fact, a survey by ING Direct found that only five parents out of 1,042 could correctly identify many common behaviors, including closing old credit card accounts and never having a credit card, as damaging to credit scores. (But over 80 percent knew that paying bills late or paying a mortgage late could ding their scores, and seven in 10 correctly named "exceeding a credit limit" as a bad idea.)

[Related: A rapid rescore can fix your credit score in a hurry]

The survey also revealed that many people falsely believe that recommended behaviors, including checking credit reports, can hurt scores. But financial experts recommend checking your credit report once a year, free of charge, at AnnualCreditReport.com. You usually have to pay to obtain your actual score, but getting the report alone will allow you to check for mistakes.
Take time to take care of your credit, and you'll thank yourself when it's time to take out a big loan.

The Dangers of Avoiding Credit

My 25-year-old coworker thought she had done everything right when it came to protecting her credit. She paid off her student loans early. When she does use a credit card, she pays it off in full each month. And she’s never been late on a monthly bill. Her credit score was over 750, which is considered excellent.

Despite that stellar record, multiple lenders turned her down for a mortgage earlier this year. The reason, they told her, was that her credit record was simply too light. Since she had paid off her student loans and didn’t use much credit elsewhere, they had no way of knowing whether or not she would be responsible with a mortgage. In other words, she was being penalized for living a relatively debt-free life. To make matters worse, one of the lenders told her that because she was shopping around so much for a loan, the multiple inquires into her credit report were starting to negatively impact her score.

Her experience gets at one of the great weaknesses of our credit reporting system: In order to borrow money, you have to have already borrowed money. That’s the only way you can demonstrate that you are “credit-worthy,” as the credit reporting bureaus put it. To get to the bottom of this conundrum, I spoke with Rod Griffin, public education director for Experian, one of the big credit reporting bureaus. Here are two truths and four myths about credit reports:

Truth: Having little experience with credit can make it hard to take on a mortgage.
The first thing lenders look for when assessing whether or not they want to give someone a mortgage is their credit history, says Griffin. That means you need to have open, active credit accounts in your name in order to demonstrate that you can handle credit.

Truth: Comparison shopping can hurt your credit score (a little).
For large purchases such as mortgages or auto loans, lenders expect consumers to shop around, so credit bureaus lump inquires that happen within a certain time period (usually 14 to 30 days) together. That means they have only a minimally negative impact on your credit report, says Griffin, so consumers don’t need to worry about shopping around, and in fact, it’s probably a good idea to do so.
But when someone—such as my young coworker—has a limited credit history to begin with, that minimally negative impact can make a bigger difference. And in fact, on her credit report, it says she’s been dinged for having “too many inquiries in the last 12 months.”
So what can someone in that situation do? The only solution is to wait it out, says Griffin. “You need to demonstrate over time that you handle your debts well, and that will be reflected in positive credit scores.”

Myth: Paying off your loans early hurts your credit report.
When you pay off a loan, your credit history is updated to reflect that, but it is still considered useful information and, because it’s positive, typically stays on your credit report for 10 years, says Griffin. (Negative information, such as a delinquency, only stays on your report for 7 years.)
But lenders have their own criteria, which is the problem my coworker likely ran into. Her lenders required her to have at least three open, active accounts for 24 months or longer, and her student loans didn’t count since they were paid off.

Myth: Your credit accounts need to be in your name only to strengthen your history.
You can build up your credit history with your parents’ help if they are willing to share a credit card with you, for example, or add you as an authorized user onto their accounts. “That’s a good starting point,” says Griffin. You can also put utility bills and other accounts in your name, even if your parents are the ones footing the bill.

Myth: College students should take out lots of credit cards to build up their credit report.
While college is a good time to wade into the credit waters and learn how to use a credit card responsibly, there’s no need to take on multiple cards, and in fact, taking on too much debt and failing to make payments will hurt your credit report. Limited and responsible use is probably best. That’s why Griffin and others in the credit industry are worried that the new Credit Card Act, which places restrictions on college students’ access to credit cards, could ultimately hurt young people’s ability to build their credit histories.

Myth: You need to take on debt in order to take out more debt.
It’s not a history of debt that you need, but a history of credit. That subtle distinction makes a big difference, because it means you don’t need to rack up credit card bills, you just need to use a credit card and pay it off each month, for example. “Credit and debt aren’t the same thing,” explains Griffin.
My coworker’s story has a happy ending. She was able to eventually buy a condo in the building she liked, but only with her parents’ help. Because of her limited credit record, lenders required a 20 percent down payment from her. It took her extra time (and her parents’ support) to save that much, but eventually she did, and now she’s a homeowner—with a beefed up credit record.

Why Seniors Are in Trouble With Credit

It might be time to help your parents—and grandparents—check their credit reports.
A new study, published in the CSA Journal, found that seniors are racking up greater amounts of debt and also face more problems on their credit reports than younger consumers. One in three people across all age groups reported finding some kind of mistake on their credit reports, and a greater percentage of seniors (36 percent) found errors. In one in four cases, the errors were significant enough to make an impact on credit scores.
The study also found that younger consumers were more likely to track their credit reports, while just one in four seniors did so. According to the Society of Certified Senior Advisors, which publishes CSA Journal, seniors should regularly check their credit reports, especially since they tend to have lower risk tolerance and lower earning power. Consumers can access their credit report for free at AnnualCreditReport.com.
Here are some tips to make sure your credit report is accurate:

• Get an annual checkup. Obtain a copy of your credit report—it's free once a year—at AnnualCreditReport.com. You have to pay to obtain your actual score, but getting the report alone will allow you to check for mistakes. And don’t fall victim to a site that requires payment for a credit report and then automatically enrolls you in a credit-monitoring service.

• Fix errors. Credit bureaus are required to correct errors by law. If you see a mistake, contact them, either through their website, over the phone, or by letter, to explain what's wrong. The Federal Trade Commission recommends including copies of any documents that support your position as well as the copy of the report itself, with the errors circled. The FTC offers a sample dispute letter on its website.

• Maintain a paper trail. Keep copies of everything you send to the bureaus, and request a return receipt at the post office so you know they received your mail.

• Beware of credit-improvement scams. Dozens of companies offer to help you improve your credit score for a fee, but the easiest (and cheapest) method involves a pretty basic technique: Pay all your bills on time, stay well under your credit limits, and keep accounts in good standing over many years.
If you’re not happy with your current credit rating, here are some easy ways to give it a boost:

• Pay your bills slowly and steadily: The surest way to boost a credit score is to pay bills on time and keep accounts in good standing over many years. Avoiding credit altogether can do more harm than good, since lenders want to see that consumers have experience managing credit accounts.

• Don’t co-sign for a friend or relative: Even spouses can harm each other’s credit by co-signing for a credit card. Once your name is on account, you’re responsible for it, even if you break up. So limit your exposure to that risk by avoiding co-signing accounts whenever possible.
Despite rumors to the contrary, having a good job does nothing to boost a credit score. In fact, income has no effect whatsoever on a score. The only thing that matters is your credit history—whether you pay your bills on time.
If you do run into financial trouble and have to resort to filing for bankruptcy, your credit score can begin to rebound after one year of making on-time, regular payments. Then, after seven to 10 years, it can fully recover.

The bottom line: Use annualcreditreport.com once a year to check for any errors on your report and pay bills on time. Consider helping any older relatives to do the same.