Top Five Ways to Manage Your Credit Score
Responsibly managing your credit doesn’t have to be difficult, but if you don’t manage your credit responsibly, it can be difficult to get credit…and without credit, you can’t get that new car, or buy your first house, or even get a decent job in many cases.
So, let’s look at the top five ways to establish and maintain a good credit score:
- Establishing Credit – Sounds pretty easy, doesn’t it? Actually, it can be harder than it seems. With the economy in such turmoil, many lenders are simply not handing out credit cards and/or loans the way that they once did, so if you don’t have credit, you may have to start with one a subprime credit card, or in some cases, even a prepaid credit card. If you already know your approximate credit score, it’s as easy as comparing credit cards that cater to your credit score, choosing the one with the lowest APR, or the best rewards program, or that doesn’t charge an annual fee, and simply filling out the online application. If, however, you don’t know your credit score, it’s advisable to take a look at your credit report and then apply for your new credit card.
- Spend Responsibly – Credit cards are not “free money,” even though it feels that way at times. Whatever you charge on your credit card will have to be repaid, and if you don’t pay the balance in full every month, you’ll actually end up paying MORE for anything that you put on your credit card. Therefore, it’s advisable to only use your card for those purchases that you can either pay in full every month OR for those unexpected emergencies where you actually need to pay over time.
- Pay Your Bills on Time – To maintain your credit score, regardless of whether it is excellent, good, fair, or even poor, you must pay your bills on time. This applies to your credit card bills, your loan payments, and all sorts of other accounts, such as utility bills, doctor’s statements, insurance premiums…the list goes on. Simply put, if you can do so, pay ALL of your bills on time, every time.
- Increasing Your Credit Limits – As you establish a good credit history, many credit card companies will begin to offer you increases in your credit line. sometimes these increases are automatic, others you will need to request the credit line increase. Either way that this works, whenever you’re in a position to increase your credit line, it’s actually to your advantage to do so. The more credit that you have available, with the lowest amount of overall credit usage, can significantly increase your credit score. And, increasing your credit limit on a credit card is like applying for a new credit card, except that you’re not penalized for having the additional credit inquiries added to your credit report.
- Adding New Lines of Credit – Once you’ve responsibly managed your credit for a while, your credit score will stabilize, and you can begin to open new lines of credit as needed for major purchases, such as household appliances, auto repairs, etc. Remember however, you should always pay the item off as quickly as possible so that your debt to available credit ratio declines, thereby increasing your available credit, and potentially raising your overall credit score even further. (Only do this once or twice per year, though, as having too many inquiries into your credit report can actually lower your credit score.)