Credit scores have become even more important in today’s post-financial crisis environment. Banks and other lenders are much more selective in who they lend money to. And while interest rates are at historic lows, only the most qualified borrowers are eligible to receive them. Having a history of good credit is immeasurable for getting a loan and not paying an arm and a leg in interest costs. You’ve built your credit through the years and boast a high credit score. But now that you’ve achieved that goal, how do you maintain it? Here are five easy tips to help you keep what you’ve worked for.
1. Pay Bills on Time
Paying your bills when they come due may seem like a no-brainer. But this is the most important thing to do in order to maintain a quality credit score. An account showing a late payment, or worse a non-payment, on your credit report will severely devastate your credit score. Be sure to pay all bills, including credit cards, on time in order to maintain your score.
2. Thoroughly Check Your Credit Report
Despite all the power and efficiency of today’s computing systems, errors still do occur. Sometimes, even if you have never missed a payment on any bill, your credit report may say otherwise. Be sure to check your credit reports from the three major reporting bureaus for accuracy. If you notice anything that doesn’t belong, such as an account that you never opened or a debt that doesn’t belong to you, you must take action by disputing the item with the bureau. Be sure that your creditors are reporting accurate payment histories and contact them if you feel they have made a mistake.
3. Use Your Current Debt Wisely
Another very important aspect of your credit score is how much you use your current debt. Maintaining a proper ratio between credit available and credit used is vital to preserve your current score. A high ratio indicates a higher level of risk to lenders and this is reflected in a lower credit score. Make sure you do not overcharge your accounts and pay off your debt as soon as possible.
Closing old credit accounts is detrimental to your ratio because you’ve effectively lowered your available credit without decreasing the debt level. Keeping credit accounts open are an easy way to help maintain a positive proportion. It pays to make sure that you use all of your credit accounts. Unused accounts are liable to be closed by the lender. Spending only a tiny amount per month will reduce the risk of account closure.
Many lenders will also consider increasing the credit limits on your current accounts, especially if you have a solid payment history. This helps increase your available credit.
4. Diversify Credit Account
Credit cards are the most prominent method by which young consumers access credit. Credit cards are considered a revolving account, or an account which does not have a fixed number of payments. In contrast, installment loans have a regular payment schedule with a start date and an end date. Examples include mortgages, student loans, or vehicle loans. Having a mix of both types will positively impact your credit score. So instead of buying an appliance or piece of furniture on your credit card next time, see if the seller offers financing. Having even a small amount as part of an installment loan will help maintain your score.
5. Limit Your Credit Applications
Every time you apply for any type of loan, the prospective lender will pull a credit report. These “hard pulls” are listed on the report for subsequent viewers to see and will lower your credit score. Limit your credit applications to only a very few times each year. Applying for every credit card offer you receive is detrimental and will damage the score that you have built.
Following these five tips will help you sustain your high credit score and leave you well positioned to be approved for a loan and to take advantage of the lowest interest rates available.
This post was contributed by Dave who writes about fixing bad credit ratings for an Australian credit check website with lots of impartial advice on managing your credit history.
