Tips to Improve and Maintain a Good Credit Score
A good credit score means you can enjoy lower interest rates on your credit cards and loans. It allows you to save money on utilities, gadget services, and insurance. Your credit score is calculated with “scoring models,” computer algorithms that analyze your inputs and outputs. These scoring models an predict the likelihood of your being 90 days late in paying for a bill in the next 24 months. Scores are calculated based on the information provided by one of your credit reports. A higher credit score means a person is less likely to conk out from paying off their bills, while a low credit score means the opposite. A credit score of 600 and more is considered decent and puts you on the clean list. Here’s how to maintain your score:
Be regular with payments
Your payment history is one of the biggest factors that contribute to calculating your credit score. This means if you have a consistent past of late payments, your credit score will bear the brunt. Make sure you do not miss payments for more than 30 days as anything past the threshold is indecent and trouble-causing. To be on the clock with bills, you could set up automatic payments for the minimum amount due.
Limit your credit applications
Debt management
Applications lead to inquiries that can sometimes trace pending payments that will hurt your credit scores. Also, opening a new account decreases the average age of your accounts.
Lower the amount on revolving credits
Even if you are up to date with your bills, having a high balance on revolving credit accounts leads to a huge credit utilization rate. Instead, maintaining a low balance will improve your scores.
Manage your debt
If you’re deep into debt and loans, this will significantly lower your score and create problems in the future. To avoid this, pay off as much debt as possible.
Hold on to older credit cards
Credits card
The credit scoring formula does not focus much on inactive or passive accounts. After 10 years of inactivity, your credit card will no longer hold an account history. This will reduce your average credit rate and your credit scores will drop.
Lower your credit card balance
If your balance is higher than your limit, your score will suffer. Experts say your combined credit balances should be 30% of your combined credit limits for a higher score.
Pay close attention to your credit report
Errors happen, so check your bank statements for any unregistered transactions. Theft and credit card fraud can easily damage your score if you don’t nip them in the bud quickly. Check your reports regularly to make sure you are in close contact with your financial columns.
Please note: It takes about 3 to 6 months of good credit habits for you to finally notice a remarkable change in your credit score. It’s much easier to build a good credit score than to repair a distorted one. If you are just starting out, become an authorized user to establish a good score.