How to Maintain Your Good Credit Score

maintain good credit score

You’re credit score says a lot about you.

Missed payments and collection accounts say that you’re unorganized and neglect your obligations.

Building a good credit score is difficult but maintaining good credit is even harder.

In this article we’re going to show you some great tips to help you maintain your good credit score.

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How Your Credit Score is Calculated

how hard inquiries affect your credit score

Before you can maintain your credit score you need to know how your credit score is calculated. There are five basic categories that make up your FICO score.

Payment History (35%)  – Making your payments on time is the biggest determining factor in your score. 35% of your score is based on your payment history. This includes payment history and collection accounts.

Credit Utilization – 30% – Your credit utilization ratio is the amount of available credit you’re using.

Length of credit history – 15% – This is the average amount of time your accounts have been open.

New Accounts – 10% – When you open a new credit or loan account your score will temporary be reduced. Credit inquiries are also included in the new credit category.

Credit mix – 10% – The different types of credit accounts you have has an impact on your score. It is not good to have 5 credit cards open and nothing else. If you have credit cards, student loans, a mortgage, personal loan, and car loan it shows credit mix diversity.

1. Keep Credit Card Balances Low

Carrying high credit card debt can severely hurt your FICO score. Your credit utilization ratio is the amount of available credit you have used up.

As an example if you have three credit cards with a total credit limit of $10,000 and your total balance is $5000, you have a credit utilization ratio of 50%, which is pretty high.

Ideally, you will want to have a credit utilization ratio of 15% or lower in order to maximize your credit rating.

2. Don’t Close Credit Accounts

The amount time of your account have been opened is a determine factor in your FICO score. 15% of your overall score is based on the length of time your accounts have been open.

If you have a credit card that you never use it’s best to keep it open and active. Use it once a month to purchase gas and pay the bill in full on the due date. The will keep the card active plus will help you build more positive payments to further help your credit profile.

3. Limit New Credit Applications

When you apply for a credit card, or a loan, such as a car loan, the lender will pull a hard copy of your credit report. This creates a hard inquiry which will lower your credit score.

Before you officially apply for a card or loan, have the creditor perform a soft inquiry to see if you pre qualify for the offer. This is will give you a better idea of your approval odds before you have a hard inquiry performed.

Checking your own credit online is a soft inquiry and will not damage your credit rating.

4. Set Up Auto Pay on Your Accounts

The most common reason people get late payments is simply because they forget to pay their bills on time. You can avoid this pitfall by enabling auto pay.

Most types of accounts these days have an option to set up automatically reoccurring payments. Cell phone bills, cable, credit cards, auto payments and even your mortgage can be automatically paid from your bank account each month.

Even if you pay a different amount on your credit cards each month, you should at least set up auto pay for the minimum amount due so you’re never late. You can always make another payment if you want to.

5. Monitor Your Credit

Monitoring your credit allows you to know when there are any changes on your report. New credit inquiries, account balance changes and payment history.

Most free credit monitoring apps will alert you anytime a change happens so you can be on top of your credit.

Here are the most popular completely free credit monitoring sites.