Are you planning to maintain your good credit rating? Or do you need to improve your current credit score, so that you will have more financing options?
Below are some tips to help you achieve or maintain a good credit.
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Check your credit score.
A lot of different things could be affecting your score, so look for errors. Flaws are often overlooked: accounts that aren’t yours, satisfied debts that are shown unpaid, or payments reported as late that were actually paid on time. After these errors are fixed, the next step is paying down balances on credit cards.
Ordering your credit report is a smart move, considering the possibility of erroneous entries that may have affected your score. It’s not unusual for some customers to complain about accounts that do not belong to them, reports of late payments when they were actually paid on time and old debts which have been paid for years.
Bankruptcies can only stay up to five years and negative account records should not appear in your credit file after five years. So, if these entries are still there, it is imperative to mend these errors, clear them up in the fastest fashion possible in order to get a better credit score.
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Pay your credit card balance, bills and loans on time.
Paying off credit cards each month is a wise move. But, you don’t have to close your accounts or rip that plastic into shreds. Doing it might even be a reason why your credit score is low. What is important is that you keep the utilisation rate low and pay your current bills.
In case you exceed 30% of the remaining balance, make sure that you pay it before the monthly due date. At this point, the balance should at least stick between 25-35% of the credit limit, so that the card stays active and remains favourable for your credit score.
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Maintain an emergency fund to avoid dipping into your credit cards or getting a loan when times get rough.
It’s true that a Credit Card sometimes, is our last option. But we can’t always rely on it for everything. Setting aside a small amount of money for emergencies isn’t so hard. At least, it’s easier than paying bills off, right?
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Use your credit cards sparingly.
That piece of plastic is not an extension of your paycheck-so, nope! If you can’t pay it in cash, don’t buy it.
Don’t go beyond your limit. No matter how tempting it is to swipe that piece of plastic on the scanner, don’t do it. It’ll just add on to the already stacked Things to Pay list. If possible, use your cash.
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Don’t just pay the minimum of your credit card balance.
Pay a little bit more so your principal balance would easily go down.
Starting off small, literally, you should pay a little more than your minimum. While minimum payments each can keep you out of trouble; imagine all the trouble you could get out of in an unnoticeably short amount of time when you bring your balance down a notch! The higher amount you put into the principal, the faster it will be for you to pay off your debts.
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Avoid opening new credit accounts.
Opening new accounts cannot raise your score. This could backfire and do the opposite. New credit lines or cards could lower the average age of your accounts, which, by the way, is not good. Let’s say, you have five credit cards already and you still decided to get another credit card. Not only will it tempt you to spend more, it will also be included in the computation of your score. Unless of course, if you decide to close some high-interest credit cards and replace it with a low-interest card that you can afford to repay each month.
Important things to remember for a squeaky clean credit
- First, your utilisation rate must be lower than 30%. That means, if you have 5 credit cards, each card must have a balance of at least 70% unused credit.
- Second, the older the credit card, the better. A good credit history matters. So, even if you itch to close your oldest account-don’t do it.
- Third, payment history makes up to 35% of your credit score. So, if you like to show your credit worthiness, better start paying all your dues. If you don’t have enough money to cover all balances, a little bit of this and a little bit of that will do. But, it is not advisable all the time. You may want to deal with issues of collections, delinquency, and bankruptcy before you aim for a higher credit score. Credit reporting agencies also consider how long it took you to resolve these issues and how serious the problem is.
- Finally, the amount you owe is a huge component of your score. How much is your total outstanding balance? It takes into consideration the types of accounts and the amount of debt you currently owe.
Learn more about credit repair by talking to our in-house consultants of Clean Credit today! Call now!