A good credit score can go a long way toward helping men and women secure their financial futures. When armed with a good credit score, men and women can secure lower interest rates on mortgages and auto loans, saving them thousands upon thousands of dollars over their lifetimes.
Some people deftly use credit to their advantage their whole lives by never missing a payment or never digging themselves into deep holes with regard to consumer debt. Others fight an uphill battle, earning a great credit score after digging themselves out of debt accumulated in early adulthood. Regardless of how men and women made it to the top of the credit score mountain, once they’re there the work has only just begun. Credit scores are fluid, so high scores must be maintained in order for lenders to continue to view prospective borrowers as worthy investments. The following are a handful of ways consumers can maintain their high credit scores so they can continue to benefit from their well-earned financial reputations.
1. Routinely monitor your score
Credit scores change constantly, so it’s important that you continue to monitor your score to make sure there are no inaccuracies that can affect your standing. While each of the three major credit reporting agencies (Equifax, Experian and TransUnion) must supply one free copy of your credit report every 12 months upon your request, some credit card companies now offer free monthly credit report updates. Cardholders can take advantage of such offerings to monitor their scores. Report any discrepancies to the appropriate rating agency immediately.
2. Sign up for automatic bill pay
Credit scores can plunge quickly when consumers miss payments. No one is perfect, so it’s not out of the question that you might miss a payment one time. Numerous factors contribute to your credit score, but payment history is perhaps the most influential variable when determining the final score, so a single missed payment can do significant harm. One way to avoid that and protect your credit score at the same time is to sign up for automatic bill pay. When signing up, use a bank account that always has a relatively high balance so you don’t run the risk of having insubstantial funds when the money is automatically deducted from your account.
3. Don’t use too much of your credit
One of the benefits of having a great credit score is your available credit is likely to go up. That’s because lenders see consumers with high credit scores as good investments worthy of higher lines of credit. But using too much credit, even when you have a high score, can be detrimental to that score. Credit utilization is another factor used to determine your credit score. Your credit utilization rate is the sum of all your balances divided by your total available credit. A study from CreditKarma.com found a strong correlation between credit utilization rates and credit scores, as consumers who had lower utilization rates generally had higher scores. While it’s important to use credit (the study also found those with a zero percent utilization rate had lower credit scores than consumers with rates between 1 and 20 percent), avoid using too much of your available credit. Even if you pay your balances in full and on time each month, a high utilization rate may hurt your score. Achieving a good credit score is only half the battle for consumers. Once that credit score is high, consumers must take steps to maintain it so they can continue to benefit for years to come.