3 tips to help you keep your credit in good shape


There are many reasons why your credit is such an important part of your financial well-being. Most importantly, your credit affects your ability to get approval for future lines of credit (and on what terms). It can also affect your interest rates on credit accounts, the amount you pay for insurance, your job prospects, and where you can live.

For all of these reasons and more, having healthy credit is something to work towards. Building positive credit is a goal that takes time and dedication to achieve; maintain it is a life project. When making your finances more manageable is the end of the game, maintaining your credit is worth it.

These three tips are a great place to start if you want to improve or build your credit.

Understand and monitor your credit

The first step to good credit is understanding how it works, including the factors that make up your credit score and what’s on your credit reports.

Your credit score, a three-digit number that typically ranges (in the case of FICO) from 300 to 850, represents your creditworthiness at any given time. It is constantly changing based on your credit related activity. The factors that make up your score typically include: your payment history (35%), amounts owed (30%), length of credit history (15%), diversity of credit accounts (10%) and the amount of new credit (10%) percent).

The three major credit bureaus in the United States are Experian, Equifax, and TransUnion. Each agency prepares a credit report for you and, because they are independent companies, each report may be slightly different. By law, you have the right to get a free copy of your report from each office every 12 months. You can request them from www.annualcreditreport.com.

You will want to review your credit reports regularly to better understand how it works. You can also look for mistakes (which you can have corrected) that could lower your score, as well as signs of credit fraud or identity theft.

Make all your payments on time

Your payment history makes up 35% of your credit score, making it the most important factor. This means that, above all, you need to make your payments on all bills and credit accounts on time if you want to build strong credit.

Even a single 30-day late payment can have a big negative impact on your credit score and can stay on your credit reports for up to seven years. So make sure all your payments are included in your budget. A good tip: Some people find it helpful to set up automatic payments when possible.

Keep credit card balances low or eliminated

The next step on the credit totem pole is something FICO calls “amounts owed,” which make up 30% of your credit score. This factor examines the amount of your credit card balances against the amount of your credit limits, known as the credit utilization rate.

To find your global credit utilization rate, simply add up all your card balances and divide that number by the sum of all your credit limits. For example, if you have $ 6,000 of available credit and you have a balance of $ 1,500, your usage would be 25% (1,500 divided by 6,000 equals 0.25 or 25%).

Most experts recommend keeping your credit utilization rate at 30% or less. When it exceeds that mark, it tends to negatively impact your credit scores. In a perfect world, you should pay off your credit card balance in full every month.

If your utilization rate is currently above 30 percent, getting your balances below that mark can go a long way in improving your credit scores. Make sure your budget includes money dedicated to reducing your debt rather than making minimum payments each month.

The bottom line

While there are many ways to build your credit, these three tips are a good place to start. You’ll get off to a good start if you understand how it works, make all your payments on time, and keep your credit card balances low.

If you need a car, taking out a car loan is another way to build up credit. With the help of Auto Express Credit, you also won’t have to worry about finding financing on your own. We connect car buyers with local dealerships who are equipped to handle most types of credit situations.

Our service is free and doesn’t commit you to anything, so you have nothing to lose. Start now by completing our car loan application form.

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