3 Easy Habits to Develop for Good Credit
This is a guest article submitted to Fact Not Opinions on personal finances
Is your credit score struggling right now? Don’t worry, you’re not alone. Although building and maintaining credit seems strenuous and tiresome, the steps are actually very simple.
It’s likely that you are just uncertain about the way to go about starting such a process, but you should be aware of the fact that good credit has its benefits; such as making it easier to find a job, land an apartment, receive credit card deals, etc. It is more than just a number.
With that being said, here are 3 habits you need to develop if you want to improve your credit.
1. Paying Your Bills on Time
Having past-due payments is an easy way to hurt your credit score. Imagine you are a real estate agent and you are dealing with a client who is interested in an expensive place, but it turns out they can’t even pay their bills on time. Does that sound like someone you would want to work with?
You must keep track of your deadlines. Here is a simple strategy you can apply right now: set reminders on your phone. If you don’t have that option, use a calendar. Add payment reminders on the days that they are due. It is possible to forget about deadlines, but if you develop this habit, that is no longer an excuse.
2. Saving Your Credit Accounts
Never get rid of previous credit accounts. Whether or not you still use them is irrelevant. They can still help your credit. Please do not get rid of them. Leave them alone.
A factor that contributes to your overall credit score is your credit age, which takes notice of how old your credit accounts are. The older your credit is, the more suitable you look to anyone you are trying to work with financially.
Another important factor of your credit that involves keeping credit accounts open is your ‘credit mix.’ Your credit mix is a 10% portion of your credit score that includes all of the different types of credit that you have; such as credit cards, mortgage, or even student loans.
While having multiple forms of credit can look promising for one’s score, it’s important to be cognizant of the fact that you should pace yourself and apply this strategy with
moderation. Diversifying your credit mix at a fast pace can either help or harm depending on your credit’s history.
3. Keeping Your Balances Low
This final strategy will tie into your credit card utilization rate, which is the percentage of your credit limit that you use. This can be calculated simply by dividing the amount spent during your billing period by your credit limit. We want to keep this below 30%. Higher percentages will give the impression that you are behind on payments or are an over spender.
Decrease the amount of money you spend on a regular basis. If that is not an option given your current situation, then make your regular payments with a debit card. This will reduce your utilization rate and aid your credit score simultaneously.
Also, pay your card balances down ahead of time. Waiting until the end of your billing cycle to pay your balances down will result in them being reported and added to your utilization rate.
The bottom line is, we all are aware of the importance of having our credit in good shape and we should be even more aware of ways to improve.
Consistently paying your bills on time will help maintain your score and show that you obey deadlines. Keeping all of your credit accounts will contribute to your credit age and mix. Keeping your balances low will suppress your credit card utilization rate; thus, improving your score.
The steps are simple. It’s time to take action.
Michael Deshield is a freelance writer with a focus in Personal Finance. He is based in Philadelphia, PA
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