4 Practical Guidelines on How to Maintain a Good Credit ScoreMay 19, 2021
Why is it important to have a good credit score? Strategies to improve your Credit Score
A credit score is a grading system used by the financial services industry to summarize and explain a consumer’s reputation. Especially in relation to debt, and creditworthiness. The higher your score, the better your reputation is. Credit scores are an extremely important part of modern life because they’re used to facilitate virtually every transaction that people engage in. Wells Fargo Bank advises that “Once you get credit — like a home loan or a credit card — the most important thing is to keep control of it, so you can achieve your financial goals without getting too far into debt.”
Here are a few quick tips on how to maintain a good credit score:
1) Never Miss a Payment on Debt
If you’ve ever purchased something and credit, there is a 100% guarantee that what you spend that money and is being used to monitor your creditworthiness. It doesn’t matter whether you used that credit to buy some fast food, or whether you took out a high-end bank loan. The moment you miss a payment on any kind of debt, a penalty is imposed on your credit score.
2) Keep a Low Balance of Debt
Just because you’ve been approved to use credit doesn’t mean you should use it without caution. This is because the higher your overall debt balance is, the lower your credit score will be. As a rule of thumb, try not to use more than 30% of your total credit limit for extended periods of time. Low debt balances demonstrate that you’re putting some thought into living within your means.
3) Avoid Closing Lines of Credit
If you’ve gone to the trouble of opening up multiple lines of credit, but you end up changing your mind about using them, it’s better for your credit score to let those lines remain dormant as opposed to formally closing them down. This is because inactive credit accounts still contribute to consumers’ credit utilization rate. They show that you’ve had access to credit for a long time.
4) Get Your Credit Report Once a Year
Credit scores are the actual numerical grade used to summarize creditworthiness. On the other hand, a credit report is a detailed breakdown of a consumer’s credit history. Credit reports in the United States are prepared by three major credit - reporting bureaus, namely: Equifax, Experian and TransUnion. Visit each of these organizations’ websites annually to place an order for your detailed credit reports. Once you’ve acquired your reports, review them carefully for inconsistencies or red flags.
Keeping good credit comes with a lot of work and effort. It isn’t just a matter of opening a line of credit and hoping for the best over time. Not only does it help things to budget, but it’s also necessary to keep track of your credit score so that you can modify your spending habits beneficially. The more you understand the intricacies of your finances, the better placed you’ll be to make responsible decisions. If you like what you just read from our blog, you’ll love the various informative courses, workshops and events listed on our websites and social media. Whether you’re interested in personal development, or overall improvement of your business, give us a call at 1 (888) 823-7757 to find out how The RISE Academy can help you break past your daily struggles and start soaring in success. For business development coaching by Richard Martinez, call at 626-202-2291 or follow us on Facebook and Instagram.
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