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How To Maintain a Good Credit Score
I’ve spoken previously about how to build your credit score. But I would like to move beyond that for today’s purposes and speak to maintaining a solid credit score.
Maintaining your score is every bit as crucial as building it and involves a lot of the same steps. Read on for my top tips on how to uphold a stellar credit rating.
Continue Making On-Time Payments
You have achieved a great credit score by opening accounts and making your payments in a timely fashion. Great work. But keep in mind that this is just the beginning. The longer your payment history, the better. And the more consistent you are with your payments, the greater your chances of maintaining and even improving upon your score. Even one payment that is 30-days or more past due can badly derail your progress and it takes years to fully recover. The missed payment may remain on your report for up to seven years. So, make sure to stay on top of payments and if you are going to be late, try to work out an arrangement with the creditor in advance.
Keep Your Accounts Active, even if You’re Not Regularly Using Them
Age of credit is a factor that a lot of people aren’t aware of. The older your average account (given that you have a satisfactory payment history), the more positively it will impact your overall score. With this is mind, it may be advisable to avoid cancelling older accounts. Using them once a year to make a small purchase is enough to keep the card issuer from terminating your account due to inactivity. And you maintain the benefit of having accounts with a long, solid history.
Don’t Max Out Your Cards
Credit limits are a strange thing. Card issuers don’t much care if you use the majority of your available credit. In fact, they would probably prefer it. They make more in interest and fees that way. But the credit bureaus consider credit utilization of 30% or below to be satisfactory. This means that if you have a $1,000 limit, the credit bureaus would like to see you refrain from carrying a balance higher than $300 from month-to-month. With that said, carrying no balance is even better.
Keep a Respectable Credit Mix
Something a lot of consumers don’t know if that a portion of your score is based on the types of credit accounts you have. A mixture of credit cards, a mortgage, and an automotive loan is considered a good mixture. Don’t stress too hard on this one. There’s no need to seek out debt if you can pay in cash, rather than financing. But the big takeaway here is that you don’t want to have an excessive number of credit cards without diversifying via any other form of credit.
Always Check Your Credit Report
This is a huge one. So many consumers simply assume that their credit is good because their score was favorable the last time they checked it. But keep in mind that, according to The Federal Trade Commission, one in five people have errors on their credit report.
The last thing you want is to get dinged for someone else’s missed payment. It’s advisable to check your credit report monthly. And there are services that will let you do so, completely free. If you discover an error, make sure to submit a claim to each credit bureau that has inaccurate information on file. Supporting documentation is particularly helpful when trying to get an inaccuracy removed from your account.
Keep making smart decisions with your various lines of credit and don’t forget to actively monitor your credit profile to ensure there are no mistakes.
How do you maintain your good credit? How often do you check your credit score?
