We’ve talked about raising your credit score before, and how it’s so important to get anywhere in life. I am a huge proponent of paying cash when you want something, but at some point in life, you’re going to want to move, buy a new car, or even a new house. And you have to have credit to do that. Unless you’re paying for the whole thing in cash. If that’s the case, teach me your ways!!
According to some of the latest statistics, the average credit score in the U.S. is 700. Anything from 740 to 799 is considered to be a very good score, while 800 and above is exceptional. If yours is strong, it can make it much easier to buy a house or a car, get approved for credit cards and more. In some cases, it can even play a part in your ability to land your dream job.
A credit score is based on the types of debt you have and your history of paying them. That includes unsecured and secured credit cards, personal loans, auto loans and mortgage payments. If you make late payments or have outstanding unpaid debt that goes to collection, it will have a significant negative impact on your score.
These tips can help ensure that you maintain your strong credit score.
Pay Your Bills on Time
The most important thing you can do to maintain a strong score is to always pay your bills on time. Even one missed payment, whether it’s a credit card, loan or something else, can have a significant adverse impact.
Be Cautious About Obtaining New Credit
Before applying for new credit, proceed with caution. Every time you fill out that application and a potential lender checks your credit, it’s referred to as an “inquiry” which will lower your score.
Think Carefully About Closing Old Credit Card Accounts
There are a few reasons why you should be careful before closing out an old credit card account, but the primary reason is that having older cards open can positively impact your score as it shows that you have a longer credit record. The length of your credit history accounts for 10 percent of your score.
Keep Your Debt Utilization at 30% or Lower
The higher the balances you carry on your credit cards, the lower your score will be. Aim to keep what’s referred to as debt utilization at 30% of the overall total of the amount of credit you have available. For example, if you have one card with a $5,000 limit and another with a $3,000 limit, avoid spending more than 40% of the total, or in this case, $2,400.
Keep a Close Eye on Your Credit Report
When we visited Louisville a couple years back, we really fell in love with the area. Every so often, we discuss purchasing a new home in Louisville or the surrounding areas. Taking a loan out to buy a house will affect your score drastically, and before you do so, you want to make sure all your ducks are in a row.
Errors on credit reports are common, which is why it’s so important to check them at least once a year. Take advantage of the yearly free credit reports everyone is entitled to from Equifax, Experian and TransUnion. You’ll want to pull all three, as they all show something different. Go over them carefully to check for errors, and if there are any, be sure to dispute them to keep your credit score intact. An error can cause you to pay thousands more than you need to on your new major life purchase.