Money Monday: How Much Do You Really Know About Credit?

Tips to consider when you’re ready to take control of your credit.

Posted: 10/01/2012 08:00 AM EDT
How Much Do You Really Know About Credit?

Understanding credit is so critical because it affects so many areas of your life. Most people want to do better when it comes to credit, but don’t necessarily have the resources to get started. Here are a few things to pay attention to if you’re serious about taking ownership of your credit.

 

Know Who’s Watching You

 

When it comes to understanding credit, it’s important to know just who’s watching you. Having a good credit score is definitely important when it comes to things like securing an auto loan or purchasing a home. But, are you aware of how your credit matters to non-lenders? According to the Privacy Rights Clearinghouse, prospective employers often use credit reports to gauge how responsible you are. In fact, the Society for Human Resource Management reports that 60% of employers use this practice, according to creditreport.com. Even insurance agents use your credit score to evaluate the likelihood of filing a claim — which impacts decisions on rates. Landlords may use credit reports to qualify tenants for leasing; establish rental agreements; and to determine the amount you’ll pay as a security deposit. Utility companies also look to your credit history to decide if you’ll need a deposit for service. 

 

Start With a Plan

 

Most success stories start with a great strategy. Having a plan to reduce debt can make a seemingly overwhelming process more manageable. Set realistic goals that are measurable and attainable, and track your progress along the way. Concentrating on how much progress you’ve made, versus how much further you have to go, helps you stay motivated. Your debt pay down strategy should include:

 

— studying your credit report and correcting inaccuracies

 

— creating a budget and developing a debt plan based on this budget

 

— contacting creditors regarding payment options and negotiating interest rates

 

— exploring refinance options, like mortgages and other loans

 

— consolidating debt into one single loan

 

— limiting unnecessary credit use

 

 

Maintain Good Credit

 

If you have a high credit score, then you’ve most likely worked hard to get it. However, credit scores can change, which is why it’s just as important to maintain and monitor your credit as it is to manage it. Maintaining good credit means exercising consistency in paying bills on time, keeping balances low and always keeping track of spending. Monitoring your credit consists of regularly keeping a watchful eye on your credit report to safeguard against credit fraud, like identify theft. Regular and diligent credit monitoring also helps with identifying inaccuracies in reporting early on and working quickly to dispute them.

 

Talk to Your Children About Credit

 

For many teens, opening their first credit card account is exciting. The freedom of not relying on mom and dad for money is alluring. However, children generally lack the foresight required to understand the longer term impacts of having poor credit. Parents are accountable for educating their children about using and managing credit long before they have to make credit decisions. So help protect their future! Be open to talk about finances and make credit management a part of the life lessons you’ll pass on to your children.

 

Wells Fargo’s Smarter Credit center provides many valuable tools and resources to support you in managing your credit. Visit wellsfargo.com/smarter_credit.

 

This article has been prepared for informational purposes only. The accuracy and completeness of this information is not guaranteed and is subject to change. Since each individual’s financial situation is unique, you need to review your financial objectives to determine which approaches might work best for you.

 

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