Credit repair can be a lengthy and frustrating process. Once you’ve finally achieved a healthy score, there are a few things you need to do in order to prevent it from slipping again.
Self-discipline is vital to a healthy credit score. The key to achieving a score in the high 700’s (and possibly up into the 800’s) is through cultivating good spending habits. Here are a few handy rules-of-thumb when it comes to your credit.
Use Credit, but Use it Wisely
To maintain a high score, you still need to use credit. Lenders want to see that you’re using credit responsibly, and if you’ve gone a long time without using credit at all that can actually lower your score. So you don’t necessarily have to cut up all your credit cards and close all your accounts once they are paid off. Keep at least one credit card (or possibly several), and use it responsibly.
Don’t Use More Than 10% of your Credit Limit
While you should be utilizing your credit, you should never carry a high balance on any credit card. If you carry a balance that is more than 10% of your credit limit, it can negatively impact your score.
Instead, keep your balance below 10% of your limit, and ideally pay your balance down to zero every month. This has the double benefit of strengthening your credit score and making sure you don’t spend money on interest.
Don’t Miss a Payment
A single late payment can ding your credit score. Don’t let all your hard work slip away with missed monthly payments. Instead, set up an automatic payment plan. That way you don’t have to stress out about missing a payment; you’ll have the peace of mind knowing it’s taken care of automatically each month.
Use Moderation When Applying for New Lines of Credit
When you apply for a new credit card or other type of loan, it’s recorded on your credit report. Too many applications for new credit, and your credit score will start to drop.
So if you need to apply for new credit, do so in moderation. Don’t apply for a new line of credit just because of an “amazing deal.” When you do feel like you need a new credit card, research all your options carefully and only settle on a specific card after weighing your options.
Monitor your Credit Score on an Ongoing Basis
You’ll never know how your credit score is doing if you never request your credit report, and by law you’re entitled one free credit report per year.
If you want to be sure that your credit score is in top shape at all times, you may benefit from a credit monitoring service.
photo credit: Björn Bechstein via photopin cc
photo credit: JD Hancock via photopin cc
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