Vol 7 No. 28 - April 4, 2007

How to pump up your credit score
By Louise Bolger
sun staff writer

I have always been a great believer in borrowing money. Somehow it always made sense to me to use someone else’s money rather than mine. Well, it turns out that I was right, and contrary to what your parents may have taught you, open up your wallet, pull out your credit cards and charge, charge, charge.

Borrowing money and paying it back on time is the best way to pump up your credit score. Think about it, if you have no credit history then how is a potential mortgage lender going to judge your ability to pay back a loan. This shouldn’t be news to anyone. We were always told to get credit in our names as quickly as possible, but now the conventional wisdom is to get the credit and use it. If you adopt some of the following habits you can get your credit score up to a very healthy number:

Never rent – Buying a home is probably the largest purchase you will make in your life and will, therefore, have the biggest impact on your credit score. When you finally purchase that first home and pay your mortgage payments on time for a few months, you will see a substantial boost in your credit score. In addition, by paying a monthly mortgage payment on time, the credit bureaus will recognize your ability to budget large sums of credit, which will help you with future home purchases and other big ticket items.

Never pay cash – Personally, I hate cash. I don’t like to handle it, I don’t like to count it and I would be in favor of getting rid of it completely, and people with great credit scores feel the same way I do. If you use a credit card to make purchases, every purchase is recorded with the three credit bureaus. Credit cards aren’t just for large purchases anymore, some items as inexpensive as soda and candy are now being charged. In fact, the credit card industry has a name for it – "micro-purchases." If you get in the habit of using credit cards for all purchases and paying them off when billed, you will not only give a boost to your credit score but create an organized monetary record keeping cycle.

Never use a debit card – It’s just like using cash. It won’t build your credit score and it is not protected like credit cards in the event of theft.

Pay off your balances – If you carry very low or no balances on credit cards, your credit score will take off, and banks and credit card companies will be offering you more credit than you ever dreamed. Using the smallest portion of your credit limit, preferably zero, will greatly enhance your credit score. Also, don’t be late paying your credit card bills. A few days won’t have an affect on your score, but anything over 30 days will.

Ask for higher credit card limits – If you maintain a good score, you will be granted higher limits, allowing you the freedom to borrow and carry a balance if a future need arises.

Never close a credit card account – You want to maintain all the credit history you can to prove that you are responsibly using credit.

Having a credit score of 720 or higher will do more for you when purchasing a home than even your annual income, since it also impacts your ability to get insurance and lower interest rates. The modern world is run with credit cards. Using them responsibility is a very savvy way to manage your finances and build your credit score. Plastic is still the future.

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