How to Maintain a Good Credit Score

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Your credit is used by banks, mortgage lenders, and even phone companies to evaluate how much of a risk you pose. Therefore, it’s crucial to maintain a good credit rating or you could end up paying higher fees and interest rates – or even worse – you could get disqualified for a loan completely.

Here is a guide on how to maintain good credit:

1.) Pay your bills on time and always pay at least the minimum monthly payment. If possible, pay more than the minimum amount. Remember, the longer it takes to pay off your debt, the more interest you pay.

2.) Avoid applying for new, unsolicited credit cards that come through the mail. The “pre-approved” stamp or 0% intro APR might be tempting, but overextending your credit will not help your credit score.

3.) Do not ignore overdue bills. If you’re having trouble making payments, many creditors are flexible. Contact your creditor to work out a new payment plan if possible. You won’t know unless you call.

4.) Try to keep your credit card debt as low as possible. If you constantly approach your credit limit, lenders who examine your credit report will see this negatively. Try not to exceed 50% of your available credit.

5.) Limit your applications for new credit. Regular requests for your credit report can be seen negatively by creditors and potential lenders, so only apply for new credit when it is absolutely necessary.

6.) Maintain consistency! A long history of good credit is favored by creditors. If you maintain a good reputation, they’re more likely to approve your loan.

Keep in mind, your credit rating is dependent on many factors and may vary between the various credit bureaus. Some will look only at the information on your credit report, while others will consider personal and demographic aspects such as your income, age, savings, and marital status.

Managing your “needs” vs. “wants”:

To maintain a healthy credit rating, it’s crucial that you handle your credit cards and other debt in a responsible manner. Spending more than make is easy to do if you rely on your credit card to pay for things you don’t need.

Take the time to establish a monthly budget and differentiate between items you “need” and the items you “want.” Start by taking your fixed expenses or “needs” — like rent, food, utility bills, phone bills, car loans, and insurance payments, and subtracting your variable expenses or “wants” like clothing, eating out, and entertainment. If the sum is below zero, it’s time to reduce your expenses by cutting out any unnecessary spending on “wants.”

Tips to Reduce Your Debt

Most of the time, cutting your expenses is the first step towards paying off your debts. Here are some tips to help you out:

  • Use Credit Cards Wisely: Pay on time and always pay more than the minimum due each month if possible. Be aware of finance charges and annual fees. If you can pay more, you should.
  • Avoid Impulse Buys: Do you really need that magazine, those new shoes or that designer shirt? You can save a ton of money by adopting more disciplined spending habits and avoiding impulse buys.
  • Learn to Cook: It’s much cheaper to eat at home vs. going out. The difference in cost between a week of eating at restaurants and a week of groceries will send you running to the supermarket.
  • Buy in Bulk: You’ll always need toothpaste, toilet paper and cereal, right? You might as well save some money by buying in bulk.
  • Clip Coupons, Watch for Sales and Shop at Outlets: Shop for the best prices and save whenever you can. Many grocery stores double your coupons on specific days. It may only be 30 cents here or a couple of bucks there, but over a year, it all adds up. If you can’t cut your addiction to designer labels, try outlet stores instead.
  • Ways to Lower Education Costs: If you’re a college student, look for off-hour courses. Some colleges set lower rates for evening, weekend and summer classes. Dorm supervisors may get free room and board. Some schools reward students who maintain a straight four-year graduation schedule. A little research may result in substantial savings.
  • Keep Track of ATM Usage: If you use an ATM that is not operated by your bank, the bank that owns the machine may charge a transaction fee ranging anywhere from 50 cents to $3.00. If you only make one withdrawal a month, this may not be much of an issue. However, if you’re making multiple withdrawals it will add up over time.

These are just a few tips. A group called the Consumer Literacy Consortium has a pamphlet titled 66 Ways to Save Money with some more great tips on how to maintain a good credit history and ways to save money.