Maintaining a good credit score is vital and one of the most important factors when applying for loans or new credit lines. In this article, you will learn the best and proven ways to improve your credit score.
Credit cards can offer many benefits; convenience, flexibility in payments, manage money better if used responsibly, accrue rewards depending on the type of card you are using, and can be used to improve your credit depending on how disciplined you can be when using it.
Why It Is Important to Maintain a Good Credit Score
There are few reasons why you should maintain a good credit score:
- A good credit score means you are more eligible for a lower interest rate.
- It can also be an indication that you are a low–risk borrower.
- A creditor can give you a higher credit limit because of your credit standing.
- Above all benefits, it can also make your life easier when applying for new credit or loans.
How to Maintain & Improve your Credit Score
1. Avoid Overspending on Credit Cards
The quickest way to fall into the debt trap is by irresponsibly using your credit card. A credit card is not license to buy things you can’t afford.
The best way to build a good credit score is to only spend what you can pay. This habit allows creditors to know you are a responsible borrower. You’ll find it much easier to apply for new credit or loans when you show discipline.
The same goes for loans, you should only borrow what you can afford regardless of the amount you qualify to take on. Before you sign up for loans, review your budget and see how much you can afford to repay monthly.
2. Pay Your Credit Card Balance in Full
If you follow the first step above which is spending only what you can afford, repaying your balance in full at the end of each month won’t be a problem.
In this method, you show that you are capable of paying your bills not only on time but in full making your payment history flawless. Additionally, paying off your credit cards in full each month helps you avoid racking up interests which make credit card repayment a lot easier.
Since the big factor of credit score is based on your payment history, paying your bills on time improves your credit tremendously.
3. Keep Old Account Open
The longer your credit card account is active, the better it is for you and for your credit score. Leave your oldest account open especially when there is no annual fee, this way it can help increase your credit age and build your credit.
If you close an account, it will stay in your credit report for a period of time. It won’t be removed from your report immediately, but after several years; old and closed accounts will eventually be removed from your credit report.
4. Stop Applying for Too Many Credit Cards
A credit score inquiry can hurt your credit report. When you apply for new credit or loans, the bank or lender will check your credit; this is called “Hard Inquiry”.
Hard inquiries may damage your credit score temporarily but it will regain its original score as time passes by. Just make sure to follow the previous steps to improve your credit score.
Note that credit bureaus can keep a record of how many times you applied for new credit or loans. Too many hard inquiries on your credit can be a sign of desperation and can pose a risk to lenders.
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