Keeping your score high can help you save money by reducing interest. It will also allow you to obtain the lowest rates when you are in need of borrowing. When you want to buy something big, like a car or home, a strong score can make it easier to get 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. Your credit score can help you spot any problems early and take action before they escalate.
You should first review your credit history from each of the three major consumer reporting companies (Experian Equifax 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.
To improve your credit rating, pay off your debts whenever you can. This is one of the easiest ways to boost your credit score. This can be done by setting up automatic payment or alerts to remind you of your obligations.
Credit utilization rate is another important part of your credit score, and it reflects how much revolving credit you are using. 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.
Open fewer credit cards in a shorter period of time. This could make you appear riskier 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 help you to improve your credit rating by showing the credit bureaus a good mix of revolving credits.
The mix of products that you choose to borrow from is another important factor for your credit rating. The models used to calculate your credit score take into account that you can responsibly manage different kinds of loans - from personal loans to mortgages.
It is possible to increase your credit score by getting a credit card, provided you're responsible and only use it sparingly. You should only charge a small amount to the card each month and make all of your payments on time.
You can also shift your debt around if you lower your credit utilization ratio and pay off the debt on lower interest accounts before focusing your attention on the high-interest ones. This will raise your credit score. However, you're better off focusing on debt repayment and reducing your balances.