Keeping your score high can help you save money by reducing interest. And, it can also help you get the best rates when you do need to borrow. Whether you're looking to purchase a car, home or any other big-ticket item, having a strong credit score can make it much easier to obtain financing.
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. You should also know your credit score so that you can identify potential problems before they become a problem.
First, you should review your credit reports from the three nationwide consumer reporting agencies: Experian, Equifax and TransUnion. By checking your credit reports, you can gain a better understanding of your score. If something seems suspicious, or you think you may be the victim of identity theft, contact one of the bureaus right away and get that information corrected.
The most important factor for your credit score is your payment history, so make sure you pay all your debts promptly and in full. It is easy to improve your credit score by paying on time and in full. You can do it by setting up automated payments or by setting alerts reminding you to pay bills on time.
Credit utilization rate is another important part of your credit score, and it reflects how much revolving credit you are using. Credit utilization rates should be kept below 30% to let lenders know that you are only using credit necessary for your needs.
It's best to avoid opening multiple new credit accounts at once, as it could appear risky to lenders. Opened many accounts can lower the average age of your account, which could hurt your credit score.
Try to limit your utilization of revolving credit by maintaining a high credit limit on any credit card you have, and making sure to use only 30% of your total available credit at all times. This will let the credit bureaus know that you have an even mix of credit types, which can help improve your credit score.
A good mix of loan products is another key factor in your credit score. 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.
Getting a credit card can be an easy way to build up a good credit score, as long as you are responsible with it and use it only sparingly. You should only charge a small amount to the card each month and make all of your payments on time.
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 will raise your credit score. However, you're better off focusing on debt repayment and reducing your balances.