How to Keep Good Credit

Here are some credit habits you can employ to maintain good credit:

Be careful how you use your money

Develop good habits to manage household finances. Create a budget to help yourself see how income coming in compares to expenses going out each month. Tracking your spending enables you to separate fixed and variable expenses so it is clear where it is possible to cut spending. Avoid exceeding your credit limit on lines of credit and credit cards. Exceeding or maxing out your credit lines can negatively impact your credit score. Do not skip payments—pay at least the minimum monthly payment due each month. Establish an emergency fund of three to six months’ living expenses to protect against job loss or in the event you are faced with large unexpected expenses.

Be timely in paying your bills

Organize your bills as soon as you receive them so as not to forget them or lose them. Make a list of when your bills are due and either mail your payment or schedule an online payment so that it will arrive before the due date. Contact your lenders to request a change in payment due dates to make it easier to remember when payments are due. This will enable you to ensure sufficient funds are available to cover expenses when payments are drafted. Update your contact information when changes occur to ensure statements continue to be delivered either in the mail or electronically.

Be aware of your total credit utilization ratio

The lower the percentage of your credit limit that you use, the higher your credit score. As a rule of thumb, keep your credit utilization below 30% on all of your credit cards if possible. Limit the number of accounts you open, and avoid closing old accounts, since lowering your available credit will also lower your credit score. Use your available accounts to make purchases and work to pay the balance in full every month.

Be patient when building your credit history

A key factor in determining your credit score is the length of your credit history. What’s more, lower interest rates and higher credit limits are available to borrowers with high credit scores. Your credit history goes way back to the first credit card or loan you had in your name. Additionally, being an authorized user on another person’s account also contributes to your credit score. Asking for a higher credit limit can work to improve your credit so long as your balance does not increase. You are entitled to free reports from the three major credit bureaus. Make certain to check them often for mistakes. Such examples include payments marked late when paid on time or someone else’s credit history appearing on your report.

Practice good habits over a long period of time, and you will reap the rewards of maintaining good credit.