Maintaining a high credit score is essential, as you can save money on interest. It will also allow you to obtain the lowest rates when you are in need of borrowing. If you want to finance a large purchase, such as a house, car, or any other expensive item, a good credit rating can help.
How to Maintain Good Credit
Many things can be done to keep your credit score high and improve it, such as paying your bills in a timely manner and keeping the balances of your revolving cards low. It is also important to understand your credit rating so that you can fix any issues before they worsen.
The first thing to do is review your credit report from all three of the nationwide consumer reporting agencies (Experian, Equifax and TransUnion). By checking your credit reports, you can gain a better understanding of your score. If you find something suspicious, or think that you may have been the victim, you should contact the credit bureaus and correct the information.
The most important factor for your credit score is your payment history, so make sure you pay all your debts promptly and in full. This is a simple way to boost your score. You can achieve this by setting automatic payments or setting alerts that remind your to pay on time.
Credit utilization is another part of your score that is important. It shows how much credit you have used. It's typically best to keep your credit utilization rate under 30% so lenders know you're only using the amount of credit that's necessary for your expenses.
Don't open several new credit accounts in a short period of time, as this could look risky to lenders. Opened many accounts can lower the average age of your account, which could hurt your credit score.
You can limit the use of revolving debt by maintaining a credit limit of at least 30% on your cards. This will show credit bureaus you have a mix of different types revolving debt, which is crucial to improving your score.
Your credit score also depends on a good mix of different loan products. Credit scoring models take into account the ability of borrowers to responsibly manage a wide range of loan products, including credit cards, personal loans and mortgages.
A credit card is a simple way to build your credit rating, but only if you are responsible and use it sparingly. You should only charge the card a small amount per month, and make your payments on schedule.
You can try to move debt around as well by lowering credit utilization rates and paying down debts first on accounts with lower interest rates before moving on higher-interest rate accounts. This can raise your overall score, but it's a better strategy to focus on paying off debt and getting your balances down as soon as possible.