A good credit score can help you save money, enjoy low interest rates on credit cards and loans, and help you find lower premiums on insurance. Your attitude in managing your credit will determine how you can maintain your credit score. Responsibility and accountability are major values that need to be exercised when maintaining a positive credit score. Here are some easy steps to follow to keep your credit on track.
Don’t Open New Credit Cards
How many credit cards do you really need? One or two can be enough; having multiple credit cards demands attention and a good money mindset. It really depends on your mindset towards managing your credit cards. Opening new credit cards can be tempting, but if this will only cause you to keep racking up more debt to pay, then it won’t help your financial life at all. If you already have one or two cards, make sure you’re up to date and managing your current credit before you apply for a new one. Better yet, don’t open a new card at all unless it’s absolutely necessary.
It might be comforting to know you’ve got an extra bit of pre-approved wiggle room in your budget for emergencies–or it might even be tempting to splurge on luxuries because, hey, your credit limit says you can–but applying for too many new cards can actually lower your credit score, even if you’re not using them.
Pay Your Bills On Time
Paying your bills on time is a healthy habit for your financial fitness. Be aware of the monthly payments you need to make–don’t wait for something to bounce or come back late to pay attention! Always check your bills online or by mail to make sure that you haven’t missed any payments; if it turns out you have, you can immediately process a payment and avoid interest rate increases, service interruptions, negative notices and delinquency.
In our lives we may experience an emergency or an urgent and unexpected situation that may cause us to forget a payment is due–this is understandable. We’re only human, and this happens to everyone–but the important thing is to handle it. The first thing you need to do is call your creditor, share your situation with them and ask for a payment plan. If your payment is made prior to the date your creditor reports to the credit bureaus, your credit score will not be affected and no late payments will be added to your report.
Keep Your Revolving Credit Use Below 30%
Revolving credit is what we call your monthly credit card use, or any credit that you use, pay off, and then use again. The safest guideline in maintaining good revolving credit use is to keep your credit balance below 30% of your total credit card limit. For example, you have 2 cards with a $1000 limit each. Your total credit limit is $2000, so ideally you only want to use $300 per card, or $600 total. It can be tricky to manage your balance like this, especially if you find yourself needing your card to cover expenses. Maxing your cards out every month will hurt your credit score, you will see and immediate drop in your score.
A credit card can have advantages and disadvantages depending on how you use it. While its main purpose is a convenient cashless payment or on-the-go transaction, it can also be used for service contract applications and even emergency purposes. Be fully aware of your credit card limit, balances and usage. Only request credit limit increases when absolutely necessary. And remember to pay off your balances monthly, every month.
Pay For Day-to-Day Items In Cash
While paying cash does not actually build your credit score, this habit can play a major role in improving your credit card use and keeping your credit card bills to a minimum. Only use your credit cards for important transactions. If, and that’s a strong if, you have a good money mindset, you may want to use your cash reward cards to pay for everyday items, but pay them off immediately with the money you already have set aside. Don’t spend money you don’t have, period. Credit cards aren’t a solution to being short on cash–they just postpone the problem for later. If you spend what you don’t have now, you’ll end up spending even more down the road to pay it off–and your unhappy credit score will cost you, too.
I know credit scores and reports can be hard to understand, but I am here to help. Click here to set up your discovery session.