Keep your credit rating high to save on interest. And, it can also help you get the best rates when you do need to borrow. Whether you're looking to purchase a car, home or any other big-ticket item, having a strong credit score can make it much easier to obtain financing.
How to maintain a good credit rating
You can improve your credit rating by paying your bills on time, and maintaining low balances on revolving account. Knowing your credit score will help you identify any potential issues and fix them before they turn into bigger problems.
It is important to review all three consumer reporting agencies in the United States (Experian Equifax TransUnion). By checking your credit reports, you can gain a better understanding of your score. If you see something suspicious or believe that you have been the victim of identity fraud, contact a bureau immediately to correct any incorrect information.
The most important factor for your credit score is your payment history, so make sure you pay all your debts promptly and in full. This is one of the easiest ways to boost your credit score. You can do this by setting up automatic payments or by setting up alerts that remind you to pay your bills on time.
Credit utilization is another part of your score that is important. It shows how much credit you have used. Credit utilization rates should be kept below 30% to let lenders know that you are only using credit necessary for your needs.
Open fewer credit cards in a shorter period of time. This could make you appear riskier to lenders. Opened many accounts can lower the average age of your account, which could hurt your credit score.
Try to limit your utilization of revolving credit by maintaining a high credit limit on any credit card you have, and making sure to use only 30% of your total available credit at all times. This will show the credit bureaus that you have a healthy mix of different types of revolving credit, which is key to improving your credit score.
Your credit score is also affected by the mix of loans you have. Credit scoring models take into account the ability of borrowers to responsibly manage a wide range of loan products, including credit cards, personal loans and mortgages.
Getting a credit card can be an easy way to build up a good credit score, as long as you are responsible with it and use it only sparingly. It is best to only charge a little amount on the card every month and make sure you pay your bills on time.
You can also move your debt around by lowering the credit utilization rate. Pay off your debts on lower-interested accounts first, before moving on to higher-interested ones. This strategy can help you improve your score. But it's better to pay down your debt and get your balances low as soon as possible.