Three easy ways to maintain a good credit score

Three easy ways to maintain a good credit score

Although maintaining a good credit score may feel daunting, you can manage your score by using the following three easy steps. 

  1. Pay everything on time 
  2. Use less than 30% of your available credit 
  3. Monitor other factors that make up your credit score 

The order of these steps helps focus your energy on the two biggest factors that influence your credit score — payment history and credit utilization. 

The first way to ensure that you maintain a good credit score is to always pay your bills on time. Your payment history includes not only credit card bills, but any loan payments and utility payments you may have. 

Both FICO and VantageScore, the two major credit reporting companies, put the most emphasis on timely payments when calculating credit scores. If a payment is 30 or more days late, you score can drop by as much as 100 points. In addition, you may also accrue late fees from your lender. 

In order to avoid late fees, consider setting up automatic payments for your bills or setting a monthly reminder to pay each month. 

The second-biggest factor influencing your credit score is your credit utilization ratio, or how much of your available credit you have used. This mainly applies to credit cards. 

Credit usage applies to each card you have, as well as your credit cards as a whole. To keep things simple, don’t maintain a balance of more than 30% of your credit limit on any card.  

While it’s important to keep your balances under 30% of your credit limit, the lower you can keep your usage, the better your credit score will be. Ideally, you would like your usage to be under 10%. 

In order to keep your credit usage low, use your credit cards for purchases that you know you can pay off in a short period of time.  In addition, consider paying your balance off in small chunks during your billing cycle instead of waiting for the due date — that will help keep your credit utilization consistently low instead of letting it peak. 

With the two most impactful factors of your credit score covered, keep an eye on everything else that makes up your credit score. The following are less important when it comes to your credit score and can be harder to influence, but it is still beneficial to keep these factors in mind. 

  • Types of credit accounts: It’s good to have a mix of loans and credit cards. No need to open new accounts in order to influence this part of your score though, as you need new credit for your financial goals, you’ll develop a mix over time. 
  • Average age of your accounts: Your score benefits from having accounts showing a long record of responsible use. You may want to consider leaving credit card accounts open even if you aren’t using them anymore. 
  • Recent credit applications: Aim to space out credit card applications by about six months because seeking a lot of credit at once can be a red flag. However, exceptions are mortgage, student loan, and car loan applications clustered within a two-week window. These will count only as credit checks because it will be clear that you are rate shopping. 

As you are keeping an eye on these parts of your credit report, it is also important to periodically check for errors and dispute any you find. 

To check your credit score today, visit Southland's partner Experian. For more resources on how to improve your credit score, visit Southland's page here


Source: Nerd Wallet