When you are involved in a business where your personal finances are internally linked to your business or you are only talking about your own personal credit score then it is very important to maintain a good credit score because there are many benefits of it like lower interest rates on your credit cards and loans. A good credit score of your will also allow you to save money on insurance and security deposits on new utilities and cell phone service. Using credit responsibly and intelligently is what helps you to maintain a good score. So here are few points stating how to ensure your credit score stays good and some of the things that you need to follow whole heartedly:
You should know what goes into a good credit score
: it is very important to know about your own credit score because then it will be easier to maintain a good credit score. The information which are used to calculate your credit score like your payment history, level of debt, credit age, mix of credit and recent credit.
And there are also few things which do not affect your credit score for example checking account overdrafts and utility payments won’t automatically help or hurt your credit score.
Pay your bills timely
: paying bills does not only refer to bills of credit card and loan rather all of your bills. Though there are some bills which does not affect you credit score when you pay them on-time but if you delay the payment then it will surely affect you credit score. Even your small library fine can also affect your credit score when you delay the payment, the report will be sent to collections agency. So you need to pay your bills to maintain a good credit score.
Your credit card balance should be at minimum
: if you maintain a higher credit card balance then that won’t be a good sign for you because it will definitely worsen your credit score. Your combined credit card balance should be within 30 percent of your combined credit limits to maintain a good credit score. That’s $300 on credit card with combined limits of $1000. Charging more than 30 percent may be risky for your credit score even if you are planning to pay off the balance when your billing statement arrives. Card issuers typically report the balance when your statement closes, so that will be the number which will be reflected on credit score. It is a best idea to keep tabs on your accounts online and pay enough to reduce your balances to less than 30 percent just before the billing month.
Don’t close your old credit cards
: whenever you close your old credit cards your credit card issuer no longer sends updates to the credit bureaus and the credit scoring formula places less weight on inactive accounts. After few years the credit bureau will remove that closed account’s history from your credit report and losing that credit history will shorten your average credit age and cause your credit score to drop. Closing a credit will also shorten the credit limit for example: if the credit limit is $10,000 and you close one with a $3,000 limit then your combined credit limit will reduce to $7,000. Since to total credit limit is low, your credit balance will also reduce by $900.
Manage your debt wisely
: credit card alone does not affect your credit score. Loan balances and lines of credit also have impact on your level of debt. Having too much of debt can cost you points on credit score. Minimum of your debt helps you to maintain a good credit score.
Minimise your applications for new credit
: too many applications of credit like credit card or loan does have a negative impact on your credit card score, so before applying for new credit make sure your application for credit does have a genuine reason. Also when you apply for a new credit account it will lower your average credit age.
Keep an eye on your credit report
: maintaining a good credit report will not end all your worries, rather you must keep an eye on your credit report because there are a lot of frauds going on in the world related to credit cards. Errors can lead to drop in the score. Identity theft and credit card fraud also can lead to inaccurate information on your credit card report. So frequently checking your credit card report will not only help you with getting initial notice of any fraud but also it will be easier for to maintain your credit card balance as you can calculate that how much of your credit card balance you can still use or when you need to pay off your bills.