WEALTH GUIDE

Tips on Managing Your Credit

BY MALIK DAVIS

The long-term economic effect of the COVID-19 pandemic has wreaked havoc on many consumers as well as financial institutions who are in the business of lending money. Today, many consumers are facing unemployment, mounting debt and bankruptcies among other financial hardships.

Banks and financial lending institutions are now also facing more challenges when it comes to assessing the credit quality of borrowers. In other words, they are tightening up on their lending criteria due to the quality of credit, inflation and reduced tolerance. In a recent Federal reserve survey, the borrower’s ability to pay back debt has deteriorated and the value of collateral is decreasing along with the credit quality of loan portfolios, causing financial institutions to tighten their credit standards.

Navigating this uncertain financial world can be a huge stress, so we had a talk with The Credit Guru, Malik Davis. For over 29 years, Malik has been in the business of restoring credit and comes with a team of experts who help his clients expand their financial portfolios.

This self-taught businessman quickly realized credit (not cash) was king in the business world and that it was the key to get him to where he needed to be. Malik took control of his financial destiny by starting with a few simple steps, opening a new world of financial opportunities and a better quality of life for him and his family.

Now, he shares what he has learned to show others the road to financial freedom and how to navigate this uncertain climate and break the chains of financial stress.

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1. Pay Your Bills on Time

Your payment history is the most influential factor in determining your credit score. Payment History makes up 35% of your FICO score. The best way to avoid missing a loan or credit card payment is to set up automatic bill payments. Make sure you have set aside enough money in your account each month to cover every bill and avoid costly overdraft fees. Every missed or late payments will result in your credit score dropping by 60+ points.

2.2 Pay Down Your Credit Card Balances (Revolving Debt) Your credit utilization plays a crucial role in the calculation of your credit score. It is the next biggest factor, making up 30% of your credit score. It is based on how much of your available credit is being used (credit cards). Most experts say to keep your credit utilization below 30%, but I like to tell my clients to keep utilization 20% to 10% (optimal) below utilization for the best results. A utilization rate that exceeds 30% tends to lower your credit score. Bonus tip: If you want to avoid paying the interest on your credit card, pay the balances off in full each month before the due date.

3.3 Add to Your Credit Mix You should have a healthy mix of credit use, such as having both revolving credit (credit cards) and installment credit (loans: personal, auto, mortgage). Your credit mix makes up 10% of your Fico score. 90% of lenders, especially mortgage lenders, consider your credit mix when making lending decisions. If you only have one type of credit on your profile, consider adding a mixture of both types of credit. 4.4 Sign Up for a Credit Monitoring Service

A credit monitoring service, such as ID Club, Smart Credit or Identity IQ, acts as a personal assistant that keeps a daily track of your credit report and watches for any changes that can be linked to fraudulent activity on your report with real-time alerts. Make sure the monitoring service provides score tracking as well so you can monitor increases or decreases to your credit score. This way, you can intervene quickly if your score decreases and you can promptly address factors that influence your score, such as high balances, late payments or credit inquiries.

5.5 Dispute Credit Report Inaccuracies

Once you have a credit monitoring service that tracks all three major credit bureaus, check your credit report for inaccuracies. You can file a dispute with the appropriate bureaus, or you can hire a reputable credit repair company to help fix those inaccuracies. Fixing any issues in your credit report will give your credit scores a boost.

If you wish to retain the services of Malik Davis, The Credit Guru, visit his website at malikdavis.com or to purchase Malik’s book, Break the Chains, visit amazon.com. Z

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