November 28, 2014

Ways To Maintain A Healthy Credit Score

Ways To Maintain A Healthy Credit Score

Maintaining a good credit score offers a lot of benefits like being able to enjoy lower interest rates on your credit cards and saving money on insurance and security deposits on new utilities and cellphone service. But there’s another huge advantage to this and that it allows you to get your dream home easier than with bad credit ratings.

A lot of lenders use this three-digit number to help them determine your credit risk and that includes whether you’ll be able to pay back your loans and if you can do this on time. Therefore, it’s important that you know the different ways to maintain a good credit score especially when you’re in the market to buy a home.

Pay your bills on time. It has to be one of your main goals to pay your bills and other credit obligations on time and at the right amount every month. This includes paying for your credit cards, rents, utility bills, taxes, support payments, and service or product bills.

Do not exceed limits on your credit cards and lines of credit. It’s a good thing to follow the “20/10 Rule” wherein you do not exceed your credit card debt to more than 20% of your total yearly income after taxes. Furthermore, do not have more than 10% of your monthly income in credit card payments.

Don’t open or close any accounts. If you’re trying to increase your credit score, you shouldn’t open new cards or close old ones since doing both can negatively affect your score. Opening new credit accounts rapidly can make you look risky while lowering your credit age too. Remember, lenders prefer individuals with stable and lengthy credit histories.

Use your old cards. If you have any credit cards which you haven’t used in a while, you can try using them as this helps improve the age of your credit history and it makes you look more like a reliable borrower.

Watch your credit report regularly. It doesn’t mean that when you’ve done everything mentioned above, your credit score will remain good. Errors could still happen on your credit report that can result to a drop in your credit score. Identity theft and credit card fraud can also cause problems to your credit report, therefore, you have to practice to check it regularly to determine mistakes early and correct them when necessary.

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