If you are not cautious enough with your credit and finances, then you might suffer from a low credit score. So, the question is how to maintain a good credit score? Let’s unravel this mystery through this article.
It requires some effort to gain a fair value credit score, i.e., somewhere between 735 and 850. While some maintenance is also required to keep it there. Maintaining a good credit score isn’t a big challenge as long as an individual continues the techniques and methods he used to get the credit score high preliminarily. Few ways are there to prevent a credit score from getting down that are not related to strong financial management. Let’s discuss these ways to prevent our credit score from lowering:
Table of Contents
Maintain less than 40 percent usage of credit
The debt management decisions of an individual affect the credit score. Hence, the lesser the proportion of debt is used by a person, the greater credibility of debt management credibility one may attain in the form of a high credit score. If a person has a high credit score and he/she uses the maximum debt, this could affect his credit by lowering the credit score. Paying back the monthly credit card bill as far as possible not only helps maintain good credit levels but also shows a willingness to pay off the debt to the creditors.
Stay with financial institutions and creditors
It is considered as a potential bash against creditworthiness if an individual often switches and closes financial institutions. Staying with financial institutions and lenders indicates that debtors may be less likely to indulge in risky financial behavior as per the statistical data and correlations. Hence, if an individual closes his account and sticks with a new financial institution, one can feel comfortable banking with over the long term. It can be a healthy choice for one’s credit score.
Avoid frequent credit checks
Once in a while, a credit check from a lender doesn’t hurt a credit rating. However, frequent credit checks can point towards suddenly arising need and application for credit. It could have adverse effects on the credibility and/or the credit score. Except for the car loan, credit card application, mortgage refinances, and personal business loan applications, a multitude of credit checks will lead to lowering a credit score. Besides, staying away from too many comparison related inquiries can also be helpful. For instance, while availing a credit card, an individual may require prior approval; too many inquiries for a credit card could impart a negative effect even if he just wants a single credit card.
Keep good financial habits
The financial habits that facilitate a debtor to attain a high credit score must continue to be practiced to maintain a high credit score. The general practices that facilitate strong credit scores are listed below:
- Proper Budgeting
- Effective Debt Management
- Paying credit card bills on time
- Maintaining a reasonable Debt to Income ratios
- Good Credit History
Above mentioned methods require continuity of fiscal discipline, proper know-how, financial record keeping, and organization skills. A good idea for avoiding an over-accumulation of debt is determining and sustaining the cost of living and standard of living according to an individual’s income level. Settling extra mortgage payments and duly paying off taxes can also influence the financial credibility of an individual.
Protect financial information and identity
A credit score is also less expected to be endangered if one can assure to minimize the risk of identity theft. Tearing apart old and unneeded financial documents, availing freezing of credit during loan inactivity periods, re-examining the credit reports once or twice a year, and removing your docs from marketing, and credit card distribution lists, all such ways can prove to be helpful to safeguard the identity.
Some other techniques involve instead of taxpayer’s identification numbers, utilizing license numbers at doctor’s offices, and other places where TIN’s are not necessary, modifying computer passwords from time to time and making use of data encryption, spyware protection, and firewalls on computers.
Avoid overdraft and bounced checks
Another way due to which the credit score may get affected is from signing checks that bounce or make over-use of overdraft limit. Faulty checks are reported to credit agencies, and though, overdraft limit is technically a line of credit, it can incur financial penalties for you and may also be reported to credit agencies, depending upon the practices of the financial institution.
Maintaining a high credit score has several possible benefits such as higher loan qualification amounts, qualification for lower interest rates, and advantageous background screening for job applications requiring good financial credibility and/or credit scores. Besides, the satisfaction of an individual, knowing that he has made a solid and consistent effort in maintaining a fair credit score, can have personal benefit.
A good credit score can also prove to be useful at sudden times of low cash flow and whenever additional credit is required for large expenditures and/or investments. It is also gainful at the time of taking loans, whether personal or business, to qualify for low-interest rates and or higher amounts of loans. It can facilitate an individual to realize his dreams as far as it is well managed.