We all want good credit.
Good credit offers you financial power, security, and confidence. It will be the determining factor for obtaining a mortgage, getting a new car, improving your negotiating power, and getting higher credit card limits with lower interest rates.
But that’s not all. When you have good credit, your car insurance rates will be lower, and you won’t be required to pay deposits on cell phone service and utilities. Landlords determine your ability to pay rent based on your credit score, and a bad score can prevent you from getting into an apartment.
It’s likely you’ve already discovered the importance of establishing good credit. But achieving a good credit score isn’t so simple.
Don’t wait until you want to buy a car or house to worry about achieving good credit or paying off your debt. This is something that you should be working towards constantly. There are many small and large things that you can do that will aid in building good credit and improve your current credit score besides creating a budget and saving money.
Here are some things that you’ll want to begin implementing into your habits so that you can build and maintain a good credit score,
Know When To Pay & Pay In Full
Timing is everything, and it’s no different when it comes to making your payments. Asking your credit card issuer when your balance gets reported to the credit bureaus will help you determine when to make your payment. The goal is for a zero balance to be reported to the credit bureau. But the problem for many people is that their payment is received after the reporting date, and not seeing your payment and reporting a higher balance negatively affects your score. And this can affect your credit utilization ratio, which lowers your score.
You want to pay your bill before the closing date, and the only way to know this date is by contacting them.
Don’t Request New Credit Too Close Together
Whether you’re applying for a new car loan or trying to get a line of credit, every time you apply for a new line of credit, it’s reported on your credit report. And too many inquiries can have a negative effect on your score even if you are approved. If you are only requesting a loan or a new credit card based on needs you’ll limit the number of inquiries and protect your credit score.
Make Automatic Payments
It’s easy to forget to make a payment, and late payment has a huge impact on your score. With automatic payments set up, you can control the amount that you pay and never miss a payment. When setting this up, you’ll want to be sure that you have the funds in your account before the money is pulled from your account to avoid overdraft fees or late payment fees.
Never Close An Account
It seems logical that you should close the account if you’re not using a credit card, but there are multiple reasons why this is not a good idea. That unused credit card with a credit limit of $5000 increases your credit limit and reduces your credit utilization score. Remember you want to keep your balances at less than 30% of your available credit to maintain a good score. When you close the account, you reduce your credit limit and increase your utilization score.
It’s important that you know that establishing a good credit score takes time. It’s much easier to ruin your score than it is to repair it. This is why it’s so important to make sure that you’re paying off your credit cards in full every month, in order to keep your credit utilization low, mixing up your credit type, not applying for too much credit, and keeping unused cards open. Be patient and always keep a close eye on your credit report by signing up to get notifications of changes made.
You should consider looking into credit builder loan companies or obtaining secured credit cards and loans to help you improve your credit or to establish credit. Taking an active role in improving and maintaining your credit score is essential to good credit.