How to Improve and Keep a Good Credit Score
Are you clueless when it comes to credit? Don’t worry; many of us are in the same position. If your credit score isn’t what you’d like it to be, the good news is that there are steps you can take to improve it. And if you have a good credit score, there are things you can do to maintain it. Let’s look at some of those steps now.
Make Your Payments on Time
This one may seem obvious, but you want to make your payments on time. One missed payment isn’t the end of the world if it was an honest mistake; however, if you have several missed payments, that’s when it can be an issue for lenders.
If you can’t make the full payment, make sure you make at least the minimum payment. If you’re considering skipping your payment one month because cash flow is tight and getting caught up next month, don’t do it. Make at least the minimum payment; otherwise, it will be reported as a missed payment and hurt your credit score if you skip your payment, even if you get caught up next month.
Don’t Use Too Much of Your Available Credit.
Try not to use too much of your available credit. When you do, it appears to lenders that you’re getting close to being maxed out, and as a result, it drags down your credit score.
How much is using too much credit? Try not to use more than 35 percent of your available credit at any one time. For example, if you have a credit card with a $5,000 credit limit, you wouldn’t want to carry a balance of more than $1,750 on it.
Also, try not to go over 50 percent of your available credit. That’s when it can really start to drag down your credit score.
If you go over 50 percent of your available credit once or twice a year, it’s not a big deal. However, if you consistently go over, that’s when you should expect your credit score to be lower as a result.
Try Not to Close Credit Accounts that are in Good Standing
Do you have a credit card you’ve had open for years, but you don’t use it that often anymore? Maybe the rewards aren’t what they used to be.
Your first instinct may be to close this credit card. You might think that you’d be helping your credit score by doing this since you have less available credit. However, in most cases, you’d be hurting it. Credit history length matters. When you close an old credit card with a history of making your payments on time, it reduces your credit history length, so try not to do it.
Keep the 2/2/2 Rule in Mind
Have you heard of the 2/2/2 rule? Ideally, mortgage lenders want to see that you have at least two credit accounts open for at least two years with at least a two thousand dollar credit limit each. Hence, the 2/2/2 rule.
If you don’t meet the 2/2/2 rule, it’s not the end of the world. You may still be able to get a mortgage. However, meeting the 2/2/2 rule can make getting a mortgage a lot easier.
The Bottom Line
Do you need some help improving your credit score? Speak with our experts today for a helping hand on how you can improve your credit right now.