Most people don’t know what their credit score is, let alone that it ranges
from 300 to 900 points. But knowing and maintaining one is critically
important, because in many ways it influences your lifestyle.
Simply put, the higher your score the better. A good score is around 665 to
790 and gives you respectability in the eyes of potential lenders, banks,
landlords, and insurance companies. Anything above those high numbers
would be very good or excellent.
1) Check your score
You should check your credit score at least annually to find out your
“creditworthiness.” Get into the habit of tracking your credit (you can use
Equifax as many times as you want, because requesting your own report is
considered a ‘soft hit’ and won’t affect your score in any way), and contact
the creditor at the first sign of anything that seems incorrect. If there’s an
outstanding collection then pay it right away and argue to get reimbursed
later. Otherwise, by keeping it on your credit report it will negatively impact
your credit score (and it may take up to six years to return to a good rating).
Pay your bills on time
Your credit score is influenced the most by your payment history, so never
miss a minimum payment, and resolve any late payments as soon as possible
with your creditors, who will work with you to find a mutually acceptable
plan. Consider setting up automatic payment to ensure on-time payments.
Remember, even a small debt can show up on your credit report and bring
down your score (statistics show that less than 1 percent of people with
credits scores of 800 and over are 90 days late in paying back credit).
Control your credit card spending
In other words, never max them out: the closer your credit card balances are
to your credit limit, the more your credit score is hurt, and about 30 percent
of your credit score is based on how much of your available credit you’re
using. So try to keep your balance below 75 percent of your maximum credit
limit, even if you pay fully every month (otherwise lenders might view you
as a potential risk). It’s better to have a higher credit limit and use less of it
each month. And never, under any circumstances, exceed the limit.
Don’t Close Old Credit Card Accounts
We all have them: forgotten cards in the bottom of a drawer. The common
assumption is that getting rid of these cards will help a credit standing, but
not so! Keeping your available credit lines open help your credit utilization
ratio. Use them occasionally, because it takes a 12-year history of
responsible card usage to reach a credit score of 800. Also, switching back
and forth between credit providers won’t help your score either: instead, find
out from your bank which product suits your needs and stick with it.
Don’t shop for more credit
Raising red flags at financial institutions is the last thing you want to do,
especially if you’re young and don’t have a long credit history–so avoid
shopping around for credit or opening several credit accounts in a short
period of time: this will make you look potentially risky to lenders. Instead,
work with your existing creditors to try and resolve any financial issues.
Two is better than one
Whether it is two credit cards or one card and a line of credit, try to have two
source of credit with at least a $2,000 credit limit, solely in your own name
for a minimum of two years. Maintain these two sources responsibly, and
this will go a long way in compelling credit bureaus to boost your credit
score (also, ensure that these two source are in addition to any joint accounts
you may have)
