Maintaining Good Credit

Once you know the basics, you need to apply them. If you have good credit, then you should continue to strive to keep it in good health. Here are some of the things that will help you maintain your good credit:

1. Keep an eye on the payments that you need to make. Sometimes life can get a little crazy and if you have several payments to make, you might forget one or two. Set alarms or reminders that will notify you of important payments that are coming. A good way to do this is by setting automatic payments wherever possible.
2. We learned that you want to have a mix of credit, but this doesn’t mean that you need to go and apply for a bunch of different loans or credit cards. Remember that if you open multiple accounts in a small period of time it could also hurt your score. Applying for new credit cards or loans should be an informed decision and only done as needed.
3. Increasing your credit score will take some time. Making good financial decisions and knowing the most influential factors that affect your credit score will help to improve your credit. Your goal is to reach an excellent credit level.This will provide you with the best chance of being approved for any loan you may need and it will also help you get the best possible rate.
4. Some people have multiple credit cards, which is fine. It is recommended that you have between three and five credit cards, but that you never carry balance on more than three at the same time. By having multiple cards, you show that you know how to manage different credit lines. Another recommendation is to not spend more than 10-20% of your total credit limit on each card. Having more than 10-20% of your total credit limit in use on each card could show lenders that you have borrowed more debt than you can handle, making you look more risky.
5. If you have trouble managing one credit card, you may want to try using it only for specific things like gas, utility bills, groceries, or other expenses that you regularly incur. As mentioned previously, you could keep track of the amounts you have to pay and pay it at the end of the month.

6. Something you may want to keep in mind is your debt to income ratio. You can calculate this ratio by dividing your total monthly payments toward your debts by your net income. A healthy debt to income ratio will be lower than 43%. Having this healthy debt to income ratio means you will have a safe chance of getting approved for a loan; on the other hand, if your debt to income ratio is above 43% you will have a difficult time getting approved for loans.

7. You need to know the difference between soft and hard inquires of your credit:

• Soft inquires, also referred to as a “soft pull” on credit, is when a quick check is performed on your credit. A soft pull doesn’t affect your credit score. Examples of a soft pull are when you get pre-approved for credit cards, loans, and sometimes when you are going to be employed. Often you won’t notice when a company or a bank does a soft pull of your report.
• Hard inquires or hard pulls, are what happen when you are actually applying for a loan. A hard pull can slightly lower your credit score, so be sure to limit these. Unfortunately, you can’t avoid the ding to your credit, but by preparing and knowing your score you can ask different financial institutions the requirements that they have for their credit cards and loans, which could save you a pull or two.

There are three major credit bureaus: Experian, Transunion, and Equifax. As a consumer, federal law allows you to request a free copy of your credit report from each of these three credit reporting companies once every 12 months. Reviewing your credit report will help keep you vigilant in preventing identity theft and fraud, as well as keep you informed of your credit history. It will also allow you to verify that your personal information, often collected by a financial institution or employer when checking your credit report, is correct and up to date. Learn more about requesting a free copy of your credit report.