What secrets and sorcery do high credit scorers hold? There may be plenty of credit hacks to help you keep your scores up, but learning from the experience of the successful ones could also help you reinforce your own habits and build good credit in your own time.
Here, we compiled some of the practices exercised by people with excellent credit scores which you can learn from.
Pay bills and pay them on time.
Late payments have a significant impact on your credit. Just missing one single payment can pull your credit down and deny you of access to financing. Paying your bills when they are due keeps your score in the high. But of course, to do this, you must see to it that these debts are within manageable range so you will not have a problem with keeping on-time payments.
Keep your spending in check.
Your credit cards have spending limits and the more your spending approaches this limit, the worse it is for your score. Your spending activity is determined by a metric called the utilization ratio. High credit score holders have utilization ratios that range from 4 to 10 percent. If you do not want to negatively impact your score, experts recommend not spending more 30 percent of your credit limit.
If you cannot shrink your spending, you can ask your credit card company to raise your spending limit. Or, in order to keep your score excellent, pay your balances multiple times a month, if possible.
Maintain low balances.
Low balances mean you will more able to afford full payment of your credit card debts and prevent interest from revolving through time. Those who hold excellent credit scores avoid incurring cost from this interest and therefore keep their credit in higher tiers.
Choose cards wisely.
Only sign up for cards that complement your spending habits, such as useful rewards. Always check the spending limit of the card, especially those offered by retail stores which may carry low limits. And if you are aiming to build your credit, you may benefit from a secured card which requires a deposit to be made and keep your spending in check. Also know the whats and whys of getting a card before applying for it.
About 15 percent of your credit score is about the length of your credit. Therefore, the longer you’ve been a credit holder, the higher will be your potential credit score, assuming all other factors such as your payment history and utilization ratio are good. That does not mean, however, that you cannot get excellent credit with little history.
It’s wise to start using credit cards to make minor purchases for the sake of building credit. This can help you in the long run, especially when you apply for loans or financing. The age of your credit can be shortened when you open new accounts. Closed accounts will stay in your report for at least a decade. Experts recommend keeping your older cards active to establish age and history.
An interval of about six months between credit card applications is ideal. Carrying various accounts to help raise your score, but applying too frequently (aside from major loans e.g. mortgage, car loans) can count as hard inquiries in your record and pull down your credit.
Make it a habit to monitor your score.
Credit reviews allow you to easily spot inconsistencies on your report and refute them on time. This is especially recommended when you are planning on getting a mortgage or a major debt, as any negative claim on your report can easily turn down your loan application.
Make it a habit to monitor your score. You are entitled to free credit reports every year from the credit bureaus Equifax, TransUnion, and Experian.
There is no surefire way to successful credit management, but gaining insight from these proven habits could help you strategize your way to becoming a successful, excellent credit holder.