When it comes time to negotiate your mortgage, either your first one, or renewing one, your bargaining power will be improved if your credit history has been tuned up. Most banks and financial institutions report their dealings with you to a credit bureau. This pooled information on you, is also where they check on your financial past, when you are applying for credit or a mortgage.
In your credit report, there are details such as your name, current and previous addresses, other names used, and the number of inquiries on your credit and who they were made by. Additionally, the credit history gives loans and credit cards you have been granted, as well as the credit limit on that card, your current balance, and the number of times you have been 30, 60, or 90 days late in making payments. You want to develop and follow sound financial habits that will keep your record as positive as possible.
Here are some basic principles to help you prepare for that day:
Control your money, rather than have it control you. Know your spending habits and your budget.
Pay debts on time or early. Trying to ‘eek’ out a few more cents in interest by delaying your credit card payment will backfire, if the payment is then delayed, and it adversely affects your beacon score on your credit report.
Save money by paying yourself first. If you save 10% of your income, and plan the rest of your expenses around the remaining 90%, you will end up with considerable savings before long. On the other hand, if you wait to save what is left over, you will probably find, that the expenses expand to consume the cash ( or credit ) available. If impulse buying is a problem for you, I suggest you use this recipe to cool your buying binges.
Keep cards in the bottom 30% of the credit limit you qualify for. Keeping up close to your limit, reduces your credit rating.
If you have had credit problems or disasters in the past, move on. Do not let your own pride or stubbornness prevent you from applying for that ‘secured’ card that will help you re-build.
Do not apply for credit on a whim. Each inquiry on your credit history lowers your overall score. It is not worth that hat or pen they are offering as you go into that stadium, arena, or other events.