People with good credit have good credit for a reason.
They pay their bills on time.
Here are some things people who have excellent credit do and how they keep their credit scores high.
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1. They set up auto-pay for their accounts
One of the top reasons people miss payments is because they forget. You can avoid ever having a late payment by setting up auto-pay because of simply forgetting to make a $20 minimum payment on a credit card.
Even if you usually pay your credit bills in full each month, set up auto-pay for the minimum payment due. This way, you can at least rest assured the minimum payment is made.
2. They keep their credit card balances low
Not only is keeping your credit card balances a good way to save money on interest. It keeps your credit utilization ratio low. This is the ratio is the balance of your credit accounts compared to the credit limit. Your credit utilization ratio accounts for 30% of your overall credit score.
The lower your balance, the higher your score will be. It’s that simple. If you can pay off your card in full each month, then great. If not, try to make sure you keep your balances less than 15% of the credit limit to maximize your credit scores.
3. They actively monitor their credit report
Errors on credit reports happen more often than you think. A recent study by the FTC showed that 1 in 5 consumers had an error on their credit report. The study also showed that another 70% of consumers were still actively trying to get inaccurate information removed from their report.
Errors on your report can obviously harm your credit scores. Knowing as soon as possible when something on your report doesn’t look right is the best way to stay on top of things. Two websites that allow you to view your report and your free scores are Credit Sesame and Credit Karma. Credit Sesame and Credit Karma also have excellent apps for your phone. You can monitor your credit and get daily alerts when any changes are made.
4. They don’t co-sign for anybody
When you co-sign for a relative or a friend, you are putting your credit history on the line. If you’re a co-signer on a car loan, you’re just as responsible for making the car payment as the person you’re co-signing for.
If anything happens financially to that person and they fail to make the payments, it’s your credit score that suffers. While it may be tempting to help your kids out, make sure you’re aware of the risks.
5. They don’t close their accounts
The average length of time your accounts have been open makes up 15% of your FICO score. Closing accounts reduces the average age of your open accounts and lowers your credit score. If you have credit cards, don’t close them.
And don’t let them remain inactive for too many months; your bank will close inactive accounts. Use your credit cards for small purchases each month and pay them off in full to keep them active. People with great credit have a lot of accounts that have been open for a long time.
6. They don’t rely on their credit cards
Some people use credit cards to supplement their income. They want to have a certain lifestyle thatchy couldn’t afford if they used cash, so they use their credit cards. People with good credit don’t do this. They use their credit cards for convenience or rewards while still living within their means.
If you’re relying on your credit cards and building up balances that you can’t pay off within a month, it’s a good sign that you’re living outside your means.
7. They don’t get over their head in debt
This one goes hand in hand with not relying on their credit cards. People who have excellent credit typically don’t have much unsecured debt. Unsecured debt is debt that is not secured by anything such as your car or property. Usually, unsecured debt refers to student loans, credit cards, and personal loans.
Racking up too much debt leads to higher and higher monthly payments to keep up with it. People with good credit understand the risks associated with debt and do everything they can to avoid it. Remember, if you can’t afford to pay cash for something, there is usually a good reason for it. You can’t afford it at all.
8. They have a mortgage
Since it has been proven that buying is cheaper than renting, especially if you have great credit. Why would anyone with good credit continue to rent? Unless they are in a short-term living situation, they wouldn’t. Renting is only cheaper if you plan to stay in a home for less than 3 years; even then, with inflation, it’s still a toss-up.
With interest rates still at historic lows, now is the time to buy. And since your credit score is one of the main factors determining your interest rate, the higher your credit score, the lower your rate will be. And the better deal you will end up getting on a mortgage. However, if you are still struggling to improve your score, there are mortgage programs for people with low credit scores.
9. They’re responsible in many other areas of their lives
Just because you have good credit doesn’t necessarily mean you live a responsible life. And just because you live responsibly doesn’t mean you will have excellent credit. However, people with better credit generally live more responsibly and take fewer risks.
If you find yourself having trouble coming up with the funds to pay your bills on time because you move from job to job often, or you spent too much money shopping on clothes, this is probably time to manage your life a little more responsibly if you want to attain and maintain excellent credit.
10. They’re organized
This one isn’t necessarily true either. I am quite unorganized at times, but I’m still able to maintain a good credit score by keeping track of my spending and having auto pay on my accounts. This way, it’s impossible for me to forget to make any payments on time. If you’re unorganized, you probably want to be more organized, so now is the time to start.
This list isn’t all conclusive, but most often, this is what it takes to get good credit. Actively monitoring your credit and score is one of the most important, aside from paying your bills on time.
When you’re actively involved in the day to day changes and get up to date credit score updates, you tend to be more on top of your bills. Something about getting that alert that your credit score has improved feels so good you want it to keep happening.
If you’re struggling with poor credit. Start using some of the things on this list. Before you8 know it, your credit score won’t be so bad.
Aren’t you ready for you to be the one with excellent credit?
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