From your first loan or credit card, you’re starting to build a credit history. The way you handle borrowed money is tracked on your credit reports, and this information may be used in future applications for credit, as well as applications for an apartment, a job, or a cell phone. It’s important to keep your credit score and report in good standing: here’s how.
Always Make Payments on Time
One of the biggest factors in a good credit score is a history of on-time payments. To make sure you pay your bills on time, consider setting up an automatic draft or sign up for text or email reminders. A single payment that’s more than 30 days late impacts your credit score, and it’s a negative mark that stays on your credit report for seven years. If you have multiple late payments, it can be even more damaging. To keep your credit score and report in good standing, don’t let this happen.
Keep Credit Card Balances Low
When you’re approved for a credit card, your credit line is the maximum amount you can borrow. That doesn’t mean you should keep using the credit card up to the limit of the credit line. Most experts agree that it’s best to aim to keep the balance of your credit card at no more than 30 percent of the limit. The lower your balance, the better. If you do borrow more than 30 percent of your available credit, pay it down as quickly as you can.
Limit Applications for New Credit
Trying to apply for new credit too often can have a negative impact on your credit score. Avoid applying for new credit except when you really need it. Some lenders offer pre-approval with no impact on your credit score. It’s a good idea to see if you’re pre-approved, which can lower the risk of applying for new credit with no benefit to you.
Avoid Over-Borrowing
Relying on borrowed money too much can get you into a lot of financial trouble. If you’re not paying attention to your total debt, before long you’ll find yourself unable to make your payments. One calculation mortgage lenders consider is your debt-to-income ratio. Even if you aren’t going to be looking for a mortgage in the near future, keep your debt-to-income ratio as low as possible.
Know What’s on Your Credit Report
Part of keeping your credit score and report in good standing is having a good idea of what’s on it. Review your credit reports periodically to make sure the information on them is accurate including the total amount owed and payment status. If you find an account on your credit report that you don’t recognize, it could be a sign of identity theft.
Errors on credit reports are fairly common, and incorrect information on your credit report can bring down your score. Dispute any errors you find right away. Dovly is an AI credit engine that can help you dispute any errors you find on your credit report. Try it risk-free with our free membership tier. Get in touch with Dovly today.
