The worst part of being a consumer these days, is probably maintaining an excellent credit score!
We need loans, we need to swipe credit cards every now and then, and we have good amount of debt payments to make!
One skipped debt payment or a slight default on loans will start dinging credit scores to some extent!
Actually, there’s only one specific rule to maintain a good credit score. The rule is, if you are taking out credit, then make sure to pay it back on time!
But this rule doesn’t always ensure a scratch-free credit profile.
If you are supposed to pay back a few hundred dollars by the end of this month, and you are paying it back 2 months later, then your credit scores will fall!
Now you would say that you are paying it back, your intentions were never wrong, only that you need a little more time!
Well, these excuses won’t work with the credit scoring models that the credit bureaus use to evaluate your credit score!
Here are a few unusual ways to keep a good credit score:
- Try not to max out your credit cards.
Of all the consumer debts in our country, the maximum number of debts are incurred through credit cards.
Now a life without credit cards is practically impossible. You need credit cards for nearly any transaction you do, as carrying liquid cash every time is not convenient!
So, always try to use credit cards within the credit limit.
There is this small but crucial thing, called the credit utilization ratio! It makes up 30% of your credit score.
You should always try to keep your credit utilization ratio below 35% !
Hence, whenever you max out your credit cards, the credit utilization ratio goes above 100%, which is the worst case scenario!
My suggestion would be, always pay off your credit card balances and keep room in your credit cards, so that you don’t have to exceed your credit limit!
- Having only one credit account is not enough:
The real game is to have multiple credit accounts, with all bearing positive feedback.
The information about the types of credit accounts you have, will be used by the credit bureaus to calculate your credit score!
So, your target should be to handle multiple credit accounts at the same time, with no payment defaults on them!
Example of such a thing could be, having at least 1 secured loan and 2 credit cards!
Now you surely can ask, why should you diversify your credit profile? Well, any lender should have enough information about your credit behavior before you qualify for a loan.
The lender would like to believe that you can handle multiple credit accounts, and have enough experience in the field of debts.
Just walk in the shoes of a lender once. How can someone’s expertise in credit card debt, is enough to qualify for an auto loan?
So, to get better loan terms and good credit score, you should know how to juggle with more than one or two credit accounts!
- Beware of hard inquiries:
You are always advised to apply for loans or credits only if you have the highest chance of qualifying!
Hard inquiry takes place when you approach a bank or a lender for any kind of credit.
The lender will go through your credit reports and will add the amount of the new credit to see whether or not you will be able to handle it!
This temporary addition of the new credit will increase your existing debt, and therefore hurt your credit score!
Hence your credit score may fall.
So, don’t apply for loans without checking out if you have high possibility to qualify for it; else you can decrease your score for no good reason!
- The 2017 credit report changes is what you should know of:
In the recent times, people are actually worried about medical debts, as these debts come into our lives as unexpected expenses and as a surprise!
Also, hospital bills, doctor fees, and the price of medicine are very high in our country. But as of September 2017, the credit report changes are doing us a favor!
The bureaus have decided to give us 6 months of time to figure out the best way to deal with our medical debts before they start getting reported to the credit bureaus!
Hence use this time if you are a victim of medical debt.
This is a great way to increase your credit score and also to prevent it from falling!
Here are some other short tips to help you keep a good credit score:
- Always look out for credit report errors, and whenever you find one, you should dispute. There are a few common errors that many people have to deal with occasionally. These errors break your credit reputation and decrease your credit score.
- Learn to spend within your means. There’s no magic spell you can use to increase your credit score. Practice good spending behaviour and see how your credit score gradually increases!
If your credit score has fallen significantly, and no one’s ready to offer you a loan or credit card, then you seriously need to consider rebuilding your credit score. You can do this by taking out a secured credit card. You give a cash deposit to your creditor, and this amount will be your credit limit. This way, you will be able to reestablish your credit score!