Keeping your score high can help you save money by reducing interest. A high credit score can help you find the best possible rates for borrowing. Whether you're looking to purchase a car, home or any other big-ticket item, having a strong credit score can make it much easier to obtain financing.
How to Maintain Good credit
There are many things you can do to improve your credit score and keep it high, including paying bills on time and keeping balances low on revolving accounts. Your credit score can help you spot any problems early and take action before they escalate.
Review your credit report at all three national consumer reporting agencies, (Experian Equifax TransUnion). Checking your credit reports can give you a clearer picture of where your score stands. 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 the easiest way to increase your credit 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 ratio is also an important factor in your credit rating. It indicates how much credit that you are currently using. Keep your credit usage rate below 30%. This lets lenders know you are only using what is necessary to pay for your expenses.
Avoid opening several new credit account in a short amount of time. Lenders may view this as risky. Opening a lot of accounts can also lower your average account age, which can hurt your credit score.
Use only 30% of all available credit when using revolving loans. It will demonstrate to the credit bureaus your ability to mix different types of credit. This is important for improving your credit score.
Another important factor that affects your credit score is the combination of loan products you use. 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. Charge a minimal amount each month to your card and pay all of the bills on time.
You can also move your debt around by lowering the credit utilization rate. Pay off your debts on lower-interested accounts first, before moving on to higher-interested ones. This can raise your overall score, but it's a better strategy to focus on paying off debt and getting your balances down as soon as possible.