The more you understand about your credit score, the easier it will be to keep it up to date. Your credit score is calculated using a selection of pieces of information. These range from payment history, debt amount, credit age, credit mix, and recent credit activity. Some factors have no bearing on your credit score. Overdrafts in your checking account and utility payments, for example, will not automatically help or hinder your credit score. Let us look at how to keep an excellent credit score.
Keep An Excellent Credit Score – Don’t Miss Debt Repayments
Not only your credit cards and loans, but all of your bills fall under this category. Any credit facility you have falls under the umbrella of causing an effect to your credit report and thus your score. While creditors may not report you to the credit bureaus if you pay your bills on time, activity may appear on your credit report if you fall behind. If you don’t pay a tiny library fine, it could end up on your credit report. And be transferred to a collection agency. Maintain a decent credit score by paying all of your payments on schedule. It helps to set up direct debits so that payments are sent automatically.
Keep Credit Balances Low
Your credit score will suffer if your credit card balance is higher than your credit limit. To maintain a decent credit score, keep your aggregate credit card balances under 30% of your total credit limits. On credit cards with combined limits of £1000, that’s £300. Even if you expect to pay off the balance when your billing statement arrives, charging more than 30% of your credit limit is dangerous. When your bill ends, card issuers normally report the amount. That is the number that will appear on your credit report. It’s a good idea to maintain track of your accounts online. Ensure you make enough payments to get your balances down to less than 30% shortly before the billing month ends.
Keep An Excellent Credit Score – Keep Credit Card Accounts Open!
When you close a credit card, the issuer no longer provides updates to the credit agencies. Hence inactive accounts are allocated less weight in the credit score methodology. The credit bureau will remove the history of that closed account from your credit report after about 10 years, and losing that credit history will reduce your average credit age and lower your credit score.
Closing a credit card also reduces the amount of credit you have accessible. If you have three cards with a cumulative credit limit of £10,000 and close one with a limit of £3000, your total credit limit will be cut to £7000. Closing that card lowers your barrier by £900, as your goal is to maintain your credit card balances under 30% of your available credit.
Keep Debt Levels Fairly Low Where Possible
Your credit score is influenced by more than just your credit card balances. Your debt level is also influenced by loan balances and credit lines. You can lose points on your credit score if you have too much debt. The less debt you have, the easier it will be to keep your credit score high.
Don’t Look Desperate To Potential Lenders
Too many credit inquiries, whether for a credit card or a loan, can hurt your credit score, so be sure you’re only applying for credit when it’s absolutely essential. Your average credit age is also reduced when you open a new credit account.
Keep An Excellent Credit Score – Check For Mistakes
Just because you keep your credit score in good shape doesn’t guarantee everyone else will. Errors on your credit record could result in a reduction in your credit score. Incorrect information on your credit report might also result from identity theft and credit card fraud. Checking your credit report on a regular basis throughout the year allows you to catch these errors sooner, allowing you to fix them and keep a solid credit score.
