Tips for keeping a good credit score
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After bankruptcy, it’s important to rebuild your credit score, and after you boost it, you need to keep it high. If you’ve struggled with your finances in the past, you need to develop and maintain a system of healthy financial behavior. If you’re uncertain what habits you should build, modeling your actions on those with strong and consistent credit scores isn’t a bad way to go. Here are seven habits of people with good credit scores.
#1 Keep Credit Lines Open
Keeping credit lines open is important because one significant aspect of your credit score is the average age of credit. Your older credit accounts greatly impact this so closing older accounts is not a good idea. If your older cards have higher interest rates, just don’t use them often or pay off in full before any interest accrues. Savvy consumers with higher scores don’t cut up their credit cards.
#2 Use Your Credit Cards Regularly but Responsibly
Using your credit cards regularly encourages your card issuers to raise your limits. Why is that important? See more in #3 below about credit limits. Setting up small recurring payments can keep your card active and keep your creditor offering increased limits. Using your credit card to pay your utility bills, Netflix, and other necessities is a solid habit so long as you turn around and pay off the card.
#3 Build Credit Lines and Don’t Use Them
Another aspect of your credit score is how much of your available credit is being utilized. A rule of thumb is that you should never exceed 30% of your available credit, but that’s a maximum. You should try to keep your balances very low at less than 5%. Smart people with high credit scores have tons of available credit they do not use. Getting credit limit increases helps this part of your score.
#4 Pay Off Your Balances Every Month
Rather than paying interest to the card issuer or running the risk of getting in over your head with credit cards, a good habit is to pay your balances off in full each month. You can use your card for necessities you’d spend on anyway and then pay off before your statement cuts so you avoid interest charges. Clever consumers rarely (or never) charge for things they can’t afford to pay in cash.
#5 Communicate With Creditors
If you are late on a payment, the best thing to do is to immediately contact your card issuer and explain the situation and ask if they can give you a one-time pass. If you usually pay on time, you might get a break on a late payment. But a missed payment will hit your credit score hard. Every late payment takes a hit on your score. Talking to your creditors can open up opportunities to save your score.
#6 Open New Accounts and Don’t Close Old Ones
In addition to not closing old accounts so that your average age of credit stays high, you should periodically open new accounts. This also boosts your score. Because of this dynamic, you can wind up with many card accounts to keep your score high. Set up small recurring payments like Netflix or Hulu, then set up auto-pays to pay the cards in full. You’ll never be late and it will keep your score robust.
#7 Monitor Your Credit Score
One last habit of those with good credit scores is to always know what your score is and monitor it regularly in case there are any errors, or your identity is stolen and fake accounts are opened. You can’t assume your credit report will stay clean and correct just because it was the last time you looked at it. Sign up for a monitoring program so you get regular alerts when things change.
Rebuilding your credit score after bankruptcy is a process that takes time, but it’s the best way to get on the right financial track and stay there. To find out more about boosting your credit score after bankruptcy, contact Credit Score Keys for a free consultation and tips for North Carolina consumers.