Healthy Ways to Manage Your Credit
Credit management refers to the process of managing your credit usage and payments in order to maintain a good credit score. Your credit score is a numerical representation of your creditworthiness and is used by lenders to determine whether or not to approve you for credit and at what interest rate.
Here are some tips on how to excel at credit management and improve your credit score:
Pay your bills on time. Late payments can have a significant negative impact on your credit score. Make sure to pay all of your bills on time every month.
Keep your credit utilization low. Your credit utilization is the amount of credit you're using compared to your credit limit. Aim to keep your credit utilization below 30% to maintain a good credit score. As you pay down and pay off debts, your credit utilization score will improve, which will also have a positive effect on your overall credit score.
Monitor your credit report regularly. Check your credit report for errors and inaccuracies that could be dragging down your score. You can get a free copy of your credit report from each of the three major credit bureaus once a year. You can also use a more comprehensive tool that I recommend called SmartCredit. If you’d like to check it out, just go to smartcredit.com/followme to get a full, 7-day trial for just $1. Learning how to control your future credit score by using a comprehensive, yet simple-to-use tool like SmartCredit will really put you in the driver’s seat. Grab your 7-day trial that includes all features and functionality at smartcredit.com/followme.
Keep old credit accounts open: Length of credit history is an important factor in your credit score. Don't close old credit accounts, even if you're not using them. While the goal is to pay down and pay off debt, I do not recommend closing older accounts. This will negatively impact your credit score.
Dispute errors on your credit report: If you find errors on your credit report, dispute them with the credit bureaus to have them removed.
Now, in addition to being a key factor in obtaining credit, having a good credit score can also be important in other areas of your life. Let’s take a look at a few examples:
Employment: Some employers may check your credit report as part of the hiring process. A good credit score can demonstrate that you're responsible and trustworthy.
Insurance: Insurance companies may use your credit score to determine your premiums. A good credit score may result in lower insurance rates.
Housing: Landlords and property managers may check your credit report as part of the rental application process. A good credit score can improve your chances of getting approved to rent.
Utilities: Some utility companies may require a credit check before setting up service. A good credit score can make it easier to get utility services.
Cell phone plans: Some cell phone companies may require a credit check before approving you for a plan. A good credit score can help you qualify for a plan with lower rates or better features.
Overall, having a favorable credit score will provide you with greater financial opportunities and flexibility in your life, beyond just obtaining credit. This is why I highly recommend looking into various tools and options so that you are always in control.