4 Strategies for Struggling Artists to Manage Their Credit

Credit scores are used for everything from leasing an apartment to getting a cell phone.

A low credit score could cost you an employment opportunity, affect your ability to obtain some types of insurance and cost you thousands of dollars in higher interest rates and fees.  For all these reasons, it may be beneficial to carefully manage your credit. Consider incorporating these four strategies into your credit management plan.

Check Your Credit Report

Requesting your credit report is a good place to begin your credit management strategy. Experian, Equifax, and Transunion are the three major credit reporting agencies. Each of them is required to provide you with a free copy of your credit report once every 12 months and whenever you have been denied credit or insurance due to a decision based on one of their reports. You can request your free report at annualcreditreport.com. Checking your own credit report will not lower your score.

Once you have your report, you should check it carefully. If you find anything that isn’t correct in your report, you can dispute the information with the credit agency by submitting a form on their website. They may require additional documentation to prove your dispute. You should also pay attention to any negative items on your report so that you can begin working on addressing those items.

Manage Your Credit Score

Credit reporting agencies are not required to furnish you with your credit score, however, you can obtain it from them for a fee. Some credit card companies and other services offer a free credit score as a perk of your account, so you may be able to access your score that way as well. A credit score above 700 is considered good and above 800 is excellent. However, if your score is lower than that, there are steps you can take to improve it. The most important thing you can do is to pay all your bills on time. Late or missed payments will quickly bring your credit score down. If you are currently behind on any payments, work on getting them caught up. If you are having trouble making all your payments, try contacting your lenders and see if they will work with you.

A second major factor is your credit utilization. You should try to keep your balances as low as possible, both to save yourself money in interest charges and to improve your credit score. The more available credit you have compared to your income and the greater percentage of that credit you are using, the lower your credit score will be. You can improve your credit utilization by paying down the balances on your accounts.

Other factors include the length of your credit history and the number of inquiries on your account. You can’t do much about the length of time you have had credit, but you can avoid excessive inquires by being selective about how much credit you apply for and not applying for a lot of different accounts all at once.

Finally, major derogatory marks, like bankruptcies, repossessions or defaulted loans can tank your credit score for a long period of time. The best thing you can do if you have major black marks is to demonstrate responsible use of credit and avoid getting any further negative items on your report. The longer you are able to demonstrate responsible credit management after a major derogatory item, the more likely you will be to qualify for credit. Eventually, these items will drop off your report but expect that to be a multi-year process.

Build a Positive Credit History

If you have a poor credit history or no credit history, you may want to start building up some positive credit history. However, you need to be honest with yourself about your ability to manage your credit. If you know you are likely to max out your credit cards or fall behind on payments, it may be best to avoid taking on debt. You can still build some positive history by making sure you pay your rent and your bills on time.

If you’ve decided you are ready to start building a credit history, then you may want to consider starting with a credit card. There are many options out there, so it can be a good idea to begin by weighing the pros and cons of each one and choosing the card that best fits your needs. Factors to consider include the interest rate, fees, and rewards programs. It is generally best to try to pay your balance off every month so that you don’t pay interest on your purchases. However, if you become unable to do so, make sure you make your payments on time and stop using the card until you can get the balance paid off. Try to avoid maxing out your credit limit. A good rule of thumb is to use 30% or less of your available credit to avoid lowering your credit score.

Improve Poor Credit History

If you’ve made some mistakes with your credit, the best time to start working on improving your credit history is now. The first thing you should do is avoid making your credit any worse. Don’t open new accounts if you can avoid it. If you are behind on any payments, try to get caught up. Begin paying down your balances. Once you have paid off some of your credit cards, you can close some if you want, but don’t close them all. Keep your oldest account open. You’ll want to demonstrate that you can have credit available without using it all and if you close accounts as you pay them off, that leaves you with a higher percentage of your remaining available credit being used and that can negatively impact your score. You may want to consider using a credit management tool to help you with this process.

Whether you have good, bad or no credit, there are steps you can take to better manage your credit, improve your credit score and set yourself up for financial success. These four credit management strategies can help you on your way to building or maintaining a positive credit history.