Having a good credit score often gives consumers a sense of pride. After all, there are so many benefits to having good credit! Just as with a home loan or credit card, the most important part of having good credit is being able to keep it under control. There are plenty of proactive steps you can take to maintain the strong credit score that you worked hard to earn.
Understand what makes up a credit score.
Being informed on how credit scores work is the educated way to understand how you can maintain good credit. In the FICO model there are 5 total factors that will affect your score:
- Payment history (35%): How and when you pay your balances. This also factors and past-due bills and late-payments.
- Amounts owed (30%): How much you owe on all your lines of credit compared to your credit limit.
- Credit history(15%): How long your accounts have been open
- Credit type(10%): The total mix of accounts you have (loans, cards, etc.)
- New credit(10%): New credit inquiries and new accounts opened
Pay on time
Payment history is the single largest factor in your credit score. Payment history doesn’t just apply to credit cards, but also: loans, utility bills, and more. Even small fees of $10 can put a ding on your credit report if you do not pay on time. Set dates in your calendar to remind yourself when to pay or set up “Auto Pay” accounts so that your bill is automatically paid.
Leave Old Credit Cards Open
Credit history is 15% of your score. The longer you have a card open, the more predictable your spending habits are to lenders and creditors. Removing an old credit card will lower the average account age you have, thus leading to a drop in your credit score.
Get Your Credit Report
FTC reports show that almost 1 in 5 Americans has a mistake in their credit reports. Often times, these mistakes can go unnoticed for years and leave consumers wondering why their score won’t increase. As a consumer, you are entitled to a free once-a-year credit report as mandated by the Federal government. You can access this at www.AnnualCreditReport.com.
When some people achieve good credit, they might get carried away and begin to apply left and right for various credit cards. Each time you apply for a line of credit, whether it may be a car loan or credit card, you get a ding on your score. Also, getting new cards will lower your average credit age, which accounts for 15% of your credit score.
When you finally achieve a strong, healthy credit score, you should begin to focus on methods you can apply to help keep your score high. Many consumers ask us: “What is a good credit score?”, and the answer is, it depends! The most basic steps you can take to keep your score up is paying on time, not overspending, and being consistent with the payments you make towards your balance.
If you are looking to finance your new car and have less than ideal credit, CrediReady offers one of the largest databases that connects dealerships, lenders, and buyers in all credit situations. Take a few moments to fill out our free and confidential loan search form online and we will match you with a dealership in your local area that can meet your auto financing needs.