A good credit score brings many advantages, such as easy access to credit and lowers interest rates. Given its perks, you should maintain a good credit score. Therefore, one should do everything in their power to keep the score.
In the popular FICO model used by many lenders, a good credit score falls between 670 and 739. Once the score has reached this range, the pressure to maintain that good credit score follows. It might be challenging, but practicing some healthy habits will help take your worries away. Hence, here are some healthy habits one should keep in mind.
Meet The Due Dates
Be sure to keep track of every payment schedule. Late payments have a massive impact on the credit score. Keep in mind that payment history constitutes 35% of the credit score. Therefore, be sure to pay all the bills, credit cards, and loans, even the small payments, on time.
If it is impossible to pay the balances in full, pay the minimum balance to avoid penalties. Never underestimate small payments because sometimes credit bureaus report even parking tickets and library fines.
Only Apply For Credit When Necessary
Having multiple credit cards, personal loans, or cash advance loans is fine, but living a life depending on credit is not a good habit. Moreover, having a lot of credit or loans is too hard to manage, leading to missed due payments and huge balances. That’s why some lenders reject loan applicants who have too much existing debt.
Ensure that your income is higher than your debt because most lenders review the debt-to-income ratio to measure the capability of the loan applicants to pay the debt. Thus, always consider that loan applications could still pull down a few points on the credit scores. Although, there’s nothing wrong with having multiple debts as long as it is sure to be paid in the future.
Keep Those Old Credit Cards Active
You may consider closing those old credit cards. However, long credit history still matters to achieve a good credit score. So keep those old credit cards open even when they are unused anymore. More so, credit history represents 15% of the credit score.
You can use those old credit cards for small subscriptions to make them remain active. However, if the unused credit card has a high annual fee you can close it to save money.
Check Credit Reports Regularly
It is not safe to be complacent that credit bureaus always produce accurate credit reports. Errors in credit reports are possible and could hugely affect the credit score. Thus, checking credit reports at least once a year could help correct discrepancies earlier and avoid arguments.
Also, be vigilant with credit card fraud and identity theft because malicious transactions that came from it still reflect on credit reports and could affect the credit score. That’s why it is best to check the credit report carefully as soon as it is received.
Keep An Eye On The Credit Utilization Ratio
Be mindful in utilizing credit because maxed-out credit lines can have a bad reflection on the credit score. Thus, always check the credit utilization ratio. A credit utilization ratio is a calculation used to measure credit usage against the credit limit. Keeping that ratio below 30% is a huge help to improve the credit score.
Others may suggest that the 10% ratio is better, but above all, a credit utilization rate is best when it is low. Moreover, It is better to keep track of all expenses spent on the credit card to know if the credit usage almost hit the limit.
Before these habits, what keeps a borrower a good credit score is one must be responsible for all the credits available. That’s why when it comes to keeping excellent financial condition, whether through your investments or the lines of credit you choose, discipline and integrity go a long way.
Moreover, a bad credit score reflects irresponsibility or lousy management of finances. Thus, it is dangerous that all the personal expenses were paid from the credit, especially those unnecessary expenses.
If possible, avoid accumulating debts and missing due payments. Instead, eliminate all the unnecessary debts and limit credit utilization to avoid revolving debt. Above all, credit is a lifeline that serves as the only resort in times of need.