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How to maintain a good credit score
Do you wonder why you are not getting a new credit card or why the interest rates on your financing options are so expensive? Your poor credit score can be the real culprit behind this. Earning a good credit score is not an overnight activity.
It requires the diligent and regular practice of squaring away an array of things from your end. Although it's always better to have it in good shape from the beginning, you must keep working your way out to improve the ratings. Here are a few fundamental suggestions that can enable you to keep an eye for factors that contribute to positive scores.
Tips for maintaining positive credit ratings
When you check your free credit report online, you get an idea about things that are affecting your credit history the most. Take these factors as a sign as to what you can do from your side to build your scores from here onward. The changes that you implement may need time to reflect on the next report finally. Don't stop there. Keep walking on the path of improving your credits.
Just remember that two elements play a significant role in your scoring model – payment record and credit utilization ratio. Credit utilization ratio indicates the difference between your credit limit and credit balance. The more credit balance you use against the ceiling, the more your rating will decline. Both these factors constitute about 70% of your credit record. You can take care of this 70% and the rest 30% too by making yourself accustomed to certain practices.
Do something about late payments
Like others, don’t rush for closing your account as this would not help you anyway with the past payment records. Bring yourself to doing a course correction. For example, set a reminder date for every payment related to your credit card, loan, paychecks, etc. Also, get in touch with your lenders and credit card companies to convince them to forgive the case of delayed payment this time.
Usually, credit card dealers leave you if most of your bills have been paid on time. You can cite them the valid reasons for not paying on time, such as if you were away on vacation, you genuinely forgot the due date of your bill payment, or your check got misplaced, etc. The credit report contains all the details of the missing payment, such as delinquency date, of any person for up to 7 years. However, the credit bureaus allow a delay of 30 days from the actual due date but not without imposing a penalty or a late fee.
Pay your debts
People tend to transfer their debts from one account to another, which is not a solution. Instead, you should call on your debt collector to find out whether it is possible for him to not inform the main credit bureaus about your debt if you clear it all at once. Although this can be against the terms and conditions of the agreement between the credit bureau and the collector, you can any way give it a try.
If the collector agrees, don't forget to get that in writing before you pay the full amount. Sometimes, due to clerical errors or other faults, a debt can wrongly show up in your records. Whether you owe to a lender or not or there is some discrepancy in the recorded data, approach the bureaus for the rectification at the earliest. It can have a rapid positive impact on your credit score.
Don't go for new credit cards
Applying for too many credit cards can be harmful to your credit record. So make sure you don't look for a new one unless it is essential. Otherwise, your average credit age can be hit. How long you have been using a particular credit card and what type, makes a difference in the history of your credit score. If a specific card has been in use for ten years without any slip-ups, your rating will be secure. But every time an addition is made, the current score will be overhauled to give an average estimate. That means even if you had a very high rating, it would come down a bit with the new addition.
Continue to use old credit cards
Because of not being able to clear their credit card dues, some people opt for closing their accounts. What happens as a result of this is that the credit card company stops notifying the credit bureaus about your credit score. Your account enters an inactive stage. From that time onward after about ten years, the credit score agency can erase the history of your credit report due to its dormant status. And that ultimately can cause harm to your average credit age, reducing your scores a little more. Many finance experts advise people to adopt the same strategy in case of the unused cards, especially if it doesn't charge any yearly service fees. The cause for this is that closing an account generally results in a higher credit utilization ratio.
Keep an eye on your credit utilization ratio
The credit balance is the amount of money that you owe to your credit card issuer. If the balance amount exceeds 30% of your credit limits, the ratings will most likely suffer. It wouldn't matter even if you clear the balance by its due date. It so happens because credit bureaus look at the statement balance. To avoid an unfavourable situation like this, you got to be careful with your balance.
If you have an idea that you can touch this 30% mark the coming month, then pay some amount in advance to keep your ratings safe. So, these are a few established practices that can rescue your shrinking credit score. When you apply these techniques, the results will appear. But, as mentioned already, don't think it will have an overnight impact.
Do everything that is under your control to keep your ratings from slipping down, and over a period, you will be able to notice the change. For guidance, you can even hire a financial advisor.
About the author
Isabella Rossellini is a marketing and communication expert. She also serves as a content developer with many years of experience. She has previously covered an extensive range of topics in her posts, including business and start-ups.
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