By now, you likely understand the importance of good credit. Whether shopping for a new home or automobile – or just searching for the best deal on insurance – your credit score will likely influence not only your ability to get what you want but how much you pay for it now and over time.
Bad credit habits or a bad payment history will resort in a low credit score.
What is meant by bad credit habits? This includes things like:
- Late payments
- Spending too much of your available balance on too many cards
- Having too many cards
- Having too many cards or too much revolving debt in relation to installment debt
- Not having a long credit history
- Too many inquiries in a short period of time
- Collections or liens
- Public records
Unfortunately, it’s easy and quick to turn a good credit score bad but it takes time to turn a bad credit score into a good one. Yet, when you do, you’ll be rewarded with better rates and fees, as well as better deals on purchases in general most of the time.
Here are 4 easy tips to help you keep a clean credit profile and a good credit score:
1) Pay Your Bills on Time
Most lenders will never meet you. And unlike the olden days when they’d call and get a character reference before giving you a loan, today, they just have your past credit history to rely on when determining your “credit worthiness.”
In other words, how you pay off your debts now indicates to them how you will pay off future debts.
2) Don’t Use Too Many or Too Few Credit Cards
This sounds complex and it kind of is… Use too many cards and you’ll be seen as “debt heavy.” Use too few cards and you’ll be seen as having too shallow of a credit profile. Many credit experts and financial planners suggest four revolving cards and one or two installment loans is a good mix and use of credit.
3) Always Pay At Least The Minimum Due Each Month
Always pay at least the minimum due payment each month, on time, but never less. And remember, just paying the minimum payment means it will take you years and years to pay off that credit card.
Example: Paying off a $2,000 credit payment at 18% APR with a minimum monthly payment of 2% ($40 dollars or less) will take you 30 years to pay off the amount plus interest.
4) Review Your Credit Report Regularly
The credit bureaus and your creditors CAN and DO make mistakes. If you don’t catch and get them to correct those mistakes, they can harm your credit. Thus, it’s wise to always regularly monitor your credit report from all three major credit bureaus – Experian, TransUnion, and Equifax – on a regular basis.
Credit monitoring services like Credit Score Junkies let you do this easily, for a low monthly fee.
When you review your reports, you’ll want to check:
- All accounts are yours
- The payment history / histories is/are correct
- The balance and payment are correct (this matters for your debt to credit and debt to income ratios)
- That there are no collections or public records on your report you aren’t or weren’t aware of…
- That any inquiries on the report are yours and that you were aware your credit was pulled
If you find any mistakes, you’ll want to file a dispute. Again, here at Credit Score Junkies our services help make that easier.