How to Stay On Top of Your Credit Score
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Just like performing routine maintenance on your vehicle is a good idea for anyone trying to keep their car running in great condition or having routine checkups with your doctor and having a home inspection done when buying a new home. The same philosophy is true to stay on top of your credit score.
It is always best to stay on top of issues that can affect important aspects of your life and your credit score, believe it or not, is one of those issues. The three-digit number that is your credit score is vital to your financial future among many other important factors.
Your credit score will determine whether you are eligible for a loan to make major purchases in your life and what your interest rate will be. Depending on the purchase, even a tenth of a percent can mean thousands of dollars over the course of the loan. Your score can determine weather or not you will be eligible to rent an apartment or get a credit card and most people don’t take the time to review their credit history.
All consumers should check their credit score periodically in order to make sure that their credit history is correct and there aren’t’ any errors on their credit report. You wouldn’t go years without changing the oil in your car just because it keeps running and you shouldn’t do the same with your credit because there doesn’t appear to be a problem.
If you don’t stay on top of your credit, you may not know there is an issue until you need it and at that point it is too late. Fixing issues on your credit report is not something that can be fixed quickly. The sooner you can catch any issues, the easier they are to get corrected. It doesn’t take long for one negative remark to drag your score down in a matter of weeks.
Good credit can become very bad credit in as little as a month, so staying on top of the factors that influence your score is key. Here are a few tips to help keep these factors in check and keep your credit score healthy.
How you can Monitor your Credit
You are allowed a free copy of your credit report from all three credit agencies every year, so take advantage and monitor what is on those reports. Review these reports to check and see if there are already any errors affecting your credit score. There are also sites like Credit Karma that can help you out the rest of the year.
It is a good idea to have some credit open but not max yourself out according to Experian. A solid credit history shows lenders that you have the ability to manage your finances and therefore should be able to manage your finances into the future.
If you don’t have any credit history, lenders have nothing to review and therefore may not approve your loan because they don’t know if they can trust that your will pay it back. Sometimes no credit is worse than bad credit.
It doesn’t take much to build a solid credit history, a few small credit cards and a small auto loan will get you on the right track. You don’t want to max out your available credit and the longer you can keep lines of credit open and develop a good history, the better off you are.
There are far too many people that don’t understand the factors that go into your credit score makeup. Without understanding these factors, it is more likely that you will inadvertently make a mistake.
It is best to have one or two credit cards to cover most of your expenditures according to Bankrate. There are many people that believe it is best to have several credit cards open with small balances but this can in fact hurt your credit score. If this depicts your current situation, it is suggested by Bankrate that you pay off your small balances and start to use only two cards for your purchases.
You can keep your paid off cards open but it can leave you vulnerable to identity theft, however closing those accounts can also negatively affect your credit score so it may take a little research to determine which plan is best for you.
Generally, it is a smart choice not to close any credit accounts where you have already built a strong payment history. This will show lenders that you have the ability to pay off your debts which will translate into a better ability to obtain credit in the future.
Staying on Top of Your Credit Can Limit Identity Theft
Staying on top of your credit score has other benefits besides improving your credit score and keeping it strong. Being active in monitoring your credit score can also help you identify possible identity theft.
Monitoring your credit report will help you notice the big three signs of identity theft, sooner rather than later. You will want to monitor your report for addresses where you have never lived, new credit inquiries, and accounts that you don’t recognize. Keeping an eye out for these three things will help you keep identity theft to a minimum.
These of course are evidence of identity theft after the fact, but will help you stop the thieves from damaging your credit even further and get your credit score corrected. There are several things to consider to help prevent identity theft altogether which I go into in other articles.
This is why it is so important to review your credit history often, so you can sport potential errors early so they don’t snowball and create problems that could take you years to correct. Staying on top of your credit score is one of the most important factors in your financial health and is usually one that gets set aside and over looked. Stay on top of your credit use it to help improve our financial situation.
