Your credit score is a number that you may have taken for granted, at least until it was time to achieve some of your life goals like applying for a mortgage, an auto loan, or credit cards. The fact is…your credit score is important, and it follows you your whole life.
Credit scores range from 300 to 850, and the higher your score, the better. That means you want to build your score to at least the 700 to 749 range – or what’s considered a “good” score. Once you get there you’ll need to continue building and nurturing your score.
If you continue your responsible financial behavior and take the right steps to nurture your score, you could even reach 800-plus! With an excellent score, you’ll have access to the lowest rates and best loan terms.
3 Reasons Why You Should Nurture Your Credit Score
1. You Get the Best Deals
Looking for a new cell phone plan? Applying for credit cards? Shopping around for a loan? If you want to get the best deals and low interest rates, then you need to have a good score.
2. You Have the Power to Negotiate
When you have a good score, lenders want to work with you. That means you have negotiating power and can shop around to get the best deal terms.
3. You Don’t Have to Pay a Deposit for Utilities
Most utility companies will waive the deposit so that you can have service in your name when you have a good score. As you continue to pay your utility bills on time every month, you build and improve your credit score.
3 Biggest Factors That Affect Your Credit
If you want to nurture your credit score, you need to understand the 3 biggest factors that affect your credit.
1. Payment History
Lenders want to know if you’ll pay them back. That means they will want to know your history – do you pay each bill on time every month? Have any of your accounts gone to collections? Do you have any bankruptcies? When was your last missed payment on an account?
2. Credit Utilization
How much debt do you have compared to your credit limits? You want to keep your utilization rate below 30%. You can figure out what you’re using by dividing your total credit card balances by your total credit card limits.
3. Credit History
How long have you been using credit? What is the average age of your credit accounts? If you’re closing accounts, remember to keep in mind how old the account is because once it’s closed, you lose the history – and that means your score can take a hit.
8 Tips To Maintain & Nurture Your Credit Score
Once you take the right steps to build and improve your score, how do you maintain it?
You need to nurture your credit to keep your score in good standing.
1. Stay Current On Bills, Pay On Time
Your payment history is one of the top factors when calculating your score. Set up auto pay and reminders so that you pay each bill on time every month.
2. Maintain Your History
Generally, the older the length of your credit history, the better it is for your credit score. Think twice before closing accounts because once those accounts are removed from your credit reports, they no longer be apply to your score.
3. Apply for Credit Only When Necessary
Anytime you apply for a new line of credit, your score will take a temporary hit from a hard inquiry. If you take out too many lines of credit in a short period of time, lenders might view you as a rish and your score can decline sharply.
4. Add Variety To Your Credit Mix
Have a mix of credit that includes revolving accounts and installment loans. Lenders like to see a variety of different types of tradelines on your credit history because it demonstrates your ability to manage multiple types of obligations responsibly.
5. Keep Your Credit Utilization Below 30%
Your credit score may take a hit if your monthly statement balance is over 30% of your limit, even if you pay off your balance each month. Why? Because most likely, your statement balance has been reported to the credit bureaus.
6. Become an Authorized User on Someone’s Credit card
Ask a family member with good credit if you can be added as an authorized user on one of their cards. They don’t need to give you a physical card to do this. As an authorized user, your credit will benefit from the owner of the card’s responsible credit usage and the positive credit history will be added to your credit files.
7. Don’t Avoid Your Creditors
If you can’t meet your financial obligations, don’t avoid your creditors. More often than not, they will work with you on a payment plan which is FAR better than showing missed payments on your credit report.
8. If You’re A Renter, Sign Up For RentReporters
RentReporters will add a new tradeline on your credit report and report your on time rent history as well as your ongoing payments. This creates additional positive history on your credit report and can boost your score up to 40 points!
Don’t Forget To Check Your Credit Report
Your credit score is a summary of how well you manage your credit, but even more important than your score is your complete credit report.
Checking your own credit reports will not cause your score to drop. According to the Fair and Accurate Credit Transactions Act of 2003, you are legally allowed one free credit report every 12 months from each credit reporting agency.
You want to make sure that all the information on your credit report is accurate. If there is an error, you have the right to dispute those errors.
Disputing Errors On Your Credit Report
To dispute an error, contact the credit bureau or the party who provided the incorrect information to the credit bureau. Your dispute must be investigated within 30 days, and the credit bureau has to correct or delete inaccurate, incomplete, or unverifiable information.
Upon completion of your investigation, the credit bureau must provide their findings in writing and a free copy of your report if there is a change due to your dispute. This report does not count as your free annual report.