Building good credit can open doors for you throughout your life, not just for better loan and credit card options, but also for being able to rent an apartment or establish a new cell phone plan. It’s important not to leave your credit to chance. Here are a few tips on how to build positive credit habits.
Pay All Bills on Time
The most important factor in determining your credit score is your payment history so be careful to always pay your bills on time. To be sure you don’t accidentally miss a payment, set up automatic payments for at least the minimum amount due. A positive credit habit to develop is to pay off more toward bills throughout the month whenever you can, but if you’re not able to pay extra, make sure you don’t overlook paying the minimum. Having just one bill go more than 30 days late can affect your credit for seven years.
Watch Your Credit Utilization
Another important factor in your credit score is your credit utilization. This is the percent of available credit you’re using. A good habit to get into is to keep your credit utilization under 30 percent of the available amount. If you only use credit cards when absolutely necessary and pay them back in full as soon as possible, it should be easy to keep your credit utilization low.
Don’t Apply for New Credit Unless You Need it
Having several different types of credit such as a combination of loans, a mortgage, student loans, and credit cards, demonstrates that you’re able to handle different types of accounts. That doesn’t mean you should continually apply for new credit. Whenever you fill out a new application for credit, it shows on your credit report as a hard inquiry. One hard inquiry doesn’t have a big impact on your credit score, but too many in a short period of time can make you look like a bad credit risk.
Your credit score isn’t the only thing considered by potential lenders. They also look at your debt to income ratio, which is calculated by dividing your total monthly payments toward your bills by your income each month before taxes. Carrying a large amount of debt increases your debt to income ratio and lets potential lenders know you may not have enough money to take on any more debt.
Know What’s on Your Credit Report
Review your credit report from each of the three major credit bureaus annually. When you do this, you can catch any information that’s being reported incorrectly as well as potential fraud. Through April 2022, AnnualCreditReport.com is providing free credit report access each week. This gives you an opportunity to make doubly sure that everything on your credit reports is correct.
If you do find errors on your credit report, dispute them right away. Dovly is an automated credit report engine that can take care of disputing inaccurate information with the credit bureaus for you. Try it risk-free with our free membership tier. Contact Dovly today.