What You Should Know About Building and Maintaining a Good Credit Score
If you are looking at a big purchase and are relying on loans to make the payment, you have to build and maintain a good credit score. It is a numerical representation of a borrower’s creditworthiness. With a higher score, there is a higher possibility that lenders will approve your loan request. The banks are more confident to extend a loan to someone who is likely to meet the regular debt payments.
The question is: How can one have a good credit score? It is not something that you get right away. This considers your repayment history and debt levels, among others. The number tells a story of how good a person is in settling his or her debt on time.
With this, you must be very careful about how you are spending, especially if you have access to a credit card. Swiping your card to buy that dress, watch, or the latest gadget can be really tempting and satisfying. And it is best for you to avoid doing that.
Here are more tips to keep in mind to keep a good credit score.
Paying Your Obligations on Time, in Full
To keep a good credit score, make sure that you always pay your bills on time. You have to always be aware when the due date comes. If you have to set an alarm or mark it in your calendar, do it. You have to show your lender that you are paying your dues consistently on time. This is also to help you avoid a potential monetary penalty for paying late. In addition, paying past the deadline might give your lender an impression that you do not have the capability to settle your debts.
Meanwhile, if you can pay your whole outstanding debt earlier than the loan term, do it. This is to help you keep your debt levels on a lower level, which is a pretty good picture to paint for your lender. Also, this can reduce the amount of interest you are paying.
Do Not Borrow if You Cannot Pay
This is probably the golden rule of borrowing and keeping a good credit score. Borrow only the amount you know you can repay within a certain period. Do not go beyond that because you will suffer many consequences, such as having a poor credit score and probably more debts.
Remind yourself that having a credit card should not enable you to buy anything you want, especially if you cannot afford it. You would also not want to max out your credit card limit right away. As they say, do not dig a hole for yourself.
If you are only charging the amount you can pay, it shows that you are a responsible borrower. It would be easier for future lenders to grant you a loan with that reputation.
Responsible Credit Card Management
Try and maintain only the use of one credit card. Do not snowball into collecting many credit cards in a short period of time. This is a test of your discipline as a borrower. Remember that having more credit cards means having more debts. With this, you might find it more difficult to pay them all on time.
In addition, having too many credit cards is a red flag for all lenders. You are risking a good credit score if you let yourself be in this situation.
Again, do not be tempted to go on a spending spree if it means acquiring more credit cards.
Regularly Reviewing Your Expenses
Reviewing your credit report regularly is a good way to stay updated on your payment and spending history. It can help you evaluate how you are using your loans. By doing so, you can also remind yourself to only focus on the most important purchases only. After all, you do not want to acquire tons of debts because you cannot stop buying things using your credit card.
Apart from this, you can also check if your credit report is accurate. You can cross-reference the said report with your receipts and payments to be sure. If you believe there is an error, you can raise this to the credit bureau so a correction can be made. It is important that your credit report reflects the right information, especially if you have a good credit score.
Letting Your Credit Card Age
Even if you are not using your credit card, do not close your account right away. The available balance will help you build a good debt level percentage, which allows you to have a higher score. The longer you hold on to it, the higher the credit score you will have. Remember that closing your credit card account can also lead to your credit score to decline.
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