Managing Your Credit Score: Tips and Advice

Maintaining a good credit score is essential if you hope to get approved for any type of loan, credit card, or even a place to rent. While less than 1% of the population in the U.S. has a perfect score of 850, the average score according to CreditDonkey.com is 699. Higher scores not only mean better odds of being approved for what you’re applying for but getting lower interest rates too on your Colorado Springs home purchase.

Here’s how you can improve yours or keep it where it should be.

Keep a Close Watch

One of the first steps to maintaining a good credit score is knowing what it is at all times.  That means keeping a close eye on your credit report and score as errors can, and often do, occur. Checking it throughout the year will help you detect any mistakes so that they can be corrected as quickly as possible. There are three credit reporting agencies: Experian, TransUnion and Equifax.

You can get a free credit report from each agency once per year. There are also options for regular monitoring services that allow you to check it as often as you want through sites like Experian.com.

Never Miss a Payment

One of the key factors in a good score is making all of your payments on time, in fact, it accounts for 35% of your credit score. If you have multiple payments it can be easy to forget one, but by setting up payment reminders, creating a calendar, downloading a budgeting app like Mint or enrolling in automatic payments so that they’re debited automatically through your bank account, you can prevent that.

If you’ve missed payments, get current and stay current as quickly as you can. After time, your score will increase as the older the issue, the less it counts against your score. If you’re struggling financially to make them, contact your creditors to try and work something out that will allow you to make payments on time again or seek assistance from a credit counseling service.

Keep Credit Card Balances Low

Don’t rack up huge balances on your cards as that can hurt your score too, even if you’re paying your bills on time every month. Aim to keep charges to 30 percent or less of the credit card limit because the higher your balances are in relation to your limits, the lower your credit score will be.

Charging more than 30 percent of your credit limit can be risky even if you’re planning to pay it off when the billing statement arrives as card issuers generally report the balance when the statement closes. Aim to pay it down to less than 30 percent of your limit before the billing month closes.

Be Cautious When Applying for New Credit

Every time you apply for a new credit card or loan, a hard inquiry is pulled on your report which will lower your score anywhere from six to 12 months. It will remain on your report for up to 24 months.

Don’t risk lowering your score if you don’t think there is a good chance you’ll be approved and avoid applying for several credit cards or loans within a short period.

Don’t Close Out Old Credit Cards

You might think that cutting up your old cards and closing the accounts is a good idea, but when you do that, it will reduce your available credit which can lower your score.

The credit scoring formula also places less weight on inactive accounts so a positive record won’t help your score as much as it should. When the closed account is removed entirely, it will also shorten your average credit age causing the score to drop.