Effective Ways to Maintain a Good Credit Score
You may only use your credit score a few times each year, but it is something that you cannot take for granted. A poor credit score will increase your interest rates, fees and can cause your application for a loan to be denied, while a strong score gives you the best chance at approval and can save you thousands in interest rates and fees. Many investors only check their score their credit report when applying for credit, but if there are derogatory marks on their score, it can be too late to salvage the deal. You should work at maintaining your credit score every month, even if you think you don’t need it. The following tips will help you maintain a credit score so you can take advantage of the best deals possible.
Pay on Time
The most important factor in your credit score is timely payments, yet many people routinely pay bills late. The most important bills are your mortgage and car payments, but any late payment on your report can lower your score. To keep your score as strong as possible, develop a system to help you pay your bills on time. Many companies offer automatic bill pay so you won’t even have to think about paying your bills, the payment simply comes out of your account monthly. If you would rather not go that route, you can keep a bill pay calendar on your phone or in your office. Whatever system you use, be sure to give yourself plenty of time to pay before or on the due date because as little as one late payment can result in a negative impact.
Open Balances Wisely
Many people are under the impression that new accounts have a positive impact on their credit score, but in reality it’s often the opposite that is true. Generally speaking, you should only open balances when you need to in part because your credit score is pulled every time you open an account. If your report is pulled four or five times within a 30 day period, there will be a negative impact on your credit score because each pull is seen as an attempt to obtain credit. Excessive credit pulls can lower your score anywhere from 30 to 50 points.
Reduce Your Balances
The second most important factor in your credit score is the amount of balance you keep on your accounts. Even if you pay everything on time, if you are carrying high balances, your score may suffer. When making purchases, it’s important to remember that high balances can negatively impact you, so try to use a debit card or cash rather than adding to your credit card debt. A common mistake many people make is to shift balances around in order to lower your balance, but this doesn’t work. The only way you can get rid of your balances is by paying down the debt, so it’s best not to open new accounts unless you really need to.
Monitor Your Credit
Monitoring your credit is the easiest way to keep on top of your credit score, and there are more companies now than ever dedicated to helping you do this. These companies do everything from remind you bills are due to alerting you about suspicious activity or a new account opened in your name. Fraud is an issue many people face, particularly those with common last names. A fraudulent item is very difficult to remove from your credit report and the negative impact can last for months. Paying a small monthly fee for protection can help you avoid a lower credit score.
Keep Old Accounts
Old debt on your credit report is not necessarily a bad thing. If you have a paid an account down, you may not want to entirely pay this account off. Don’t use these accounts, but keep them on your report to give a history of timely payments. This history is used to build your credit profile and it will ultimately boost your credit score.
You never know when you might need credit and when you do, you don’t want to discover unwanted problems. Not staying on top of your credit score leaves you vulnerable to fraudulent attacks and erroneous accounts. In the real estate business, your credit is one of the most valuable assets you have and you should do everything in your power to maintain your score at all times.