It’s almost impossible to navigate the modern world without using credit. Financial experts may sing the praises of operating completely with cash, to avoid building up debt. And that is one viable option. But how can you possibly run a business that way, keeping tabs on your expenses without enormous effort and hopefully gathering rewards points that lead to gifts and perks? How can you take advantage of online sales, with the deep discounts frequently offered through e-commerce portals? Credit is absolutely necessary, and without it you’ll never be approved for a car lease or a mortgage. But bad credit will sink your plans even faster than no credit will. So follow these five tips to maintain good credit.
First of all, get familiar with your credit report. Most people who find themselves in trouble have never even looked at this incredibly important document. The federal government mandates that you are allowed to request a free copy of your credit report from the three major reporting institutions once each year. Take advantage of that opportunity to review your current credit information. The report will have your entire history, your current available credit and a score that credit providers will look at when determining how much, if any they will offer to you. Take the time to review this document, and you’ll be better positioned to maintain good credit.
You might also want to sign up for a monitoring service. These often cost less than $20 a month, and are offered by the major credit bureaus, including Experian. Essentially, you’ll receive a monthly statement detailing changes to your report. You’ll also get an email notification of any negative listing or change in your credit score. This will help you track down fraudulent activity, informational mistakes or problems and rectify them before they can do any further damage.
With this avenue covered, it’s time to turn your attention to your current situation. Perhaps you have a large number of cards, and think that all of that offered credit means you’ll maintain a good credit rating. But how much of that credit are you currently using? If most of those cards have balances near their maximum, that credit won’t help you. The less available credit you have, the less companies will trust you with future queries. Try to keep at least 60% of your credit open, and you’ll be in good shape.
The best way to do this is to pay off your balances each and every month. This is difficult, because purchasing with credit cards is so effortless. Things can get out of hand in a hurry. But you’ve got to maintain control, and avoid carrying balances if at all possible. If you do accrue balances, work to pay them off. Start by paying down the credit with the highest interest rates, then move down the list from there. You’ll always be better off making your minimum payments on the low APR cards, and getting those high interest rates off of your books as quickly as you can.
Finally, be wary of picking up credit you do not need. You’ll receive offers for credit all the time. But proceed with caution. You should almost never accept a line of credit from a consumer store. These always come with high interest rates and low credit ceilings. Your purchase will quickly approach that ceiling, giving you another card that appears maxed out. And if you miss a payment, you’ll face an interest rate similar to those payday loans everyone tells you to avoid. Only accept credit from reputable banking institutions and you’ll avoid these sort of pitfalls.