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
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. It is also important to understand your credit rating so that you can fix any issues before they worsen.
You should first review your credit history from each of the three major consumer reporting companies (Experian Equifax TransUnion). It is important to check your credit scores. Contact one of the bureaus immediately if you suspect something is wrong or if you believe you are the victim of an identity theft.
If you want to improve your credit score the easiest way is to pay your debts in full and on time. This is an easy way to improve your score. You can do this by setting up automatic payments or by setting up alerts that remind you to pay your bills on time.
The credit utilization rate is an important component of your credit score. It reflects the amount of revolving debt you use. Keep your credit utilization under 30%, so that lenders can be sure you only use the credit needed to cover 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. This will show the credit bureaus that you have a healthy mix of different types of revolving credit, which is key to improving your credit score.
Your credit score is also affected by the mix of loans you have. 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.
A credit card is a simple way to build your credit rating, but only if you are responsible and 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.