Keeping your score high can help you save money by reducing interest. It can also help to get you the best rate when you need to borrow. A good credit score will make it easier for you to get financing to buy a home, car or other large-ticket items.
How to maintain a good credit rating
Paying your bills on-time and maintaining a low balance on revolving credit accounts are just two of the many ways you can keep or improve your score. Knowing your credit score will help you identify any potential issues and fix them before they turn into bigger problems.
Review your credit report at all three national consumer reporting agencies, (Experian Equifax TransUnion). Your credit score can be better understood by reviewing your credit reports. 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 a simple way to boost your score. This can be done by setting up automatic payment or alerts to remind you of your obligations.
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. A lot of new accounts will also reduce your average account age which can affect your credit score.
You can limit the use of revolving debt by maintaining a credit limit of at least 30% on your cards. It will demonstrate to the credit bureaus your ability to mix different types of credit. This is important for improving your credit score.
The mix of products that you choose to borrow from is another important factor for your credit rating. Credit scoring models calculate your score by taking into account how well you manage various types of loans from credit cards, mortgages, and personal loans.
A credit card is a simple way to build your credit rating, but only if you are responsible and use it sparingly. Only charge a small sum to the credit card each month. Make all your payments promptly.
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 strategy can help you improve your score. But it's better to pay down your debt and get your balances low as soon as possible.