A good credit score is important to the level of financial freedom you are able to enjoy. Your credit score impacts your life in many ways: enabling you to easily obtain loans, determining how much you will pay for insurance and even influencing your job opportunities.
There are five ways to improve and maintain a high credit rating to ensure you will be unlimited in your ability to navigate financial dealings with ease.
1) Pay your bills on time
Many of your creditors report your credit activity to the credit bureaus on a monthly basis. Paying bills in a timely manner not only saves you money on late charges and past due fees, but a record reflecting bills paid consistently on time accounts for 35% of your total credit score.
2) Limit credit use
Rotate use of your credit cards, ensuring each one carries a balance of only 10% of your total credit line for that card. Maxing out your credit cards to the limit, will reflect poorly on your credit score.
3) Keep all credit cards open
Even if you are not using a credit card and have paid the balance in full, do not close it with the misguided thinking that doing so will improve your credit score. Closing a credit card will reduce your total credit line, thus also reducing your credit score.
By the same token, refrain from requesting new lines of credit when you are attempting to improve your credit score, for new requests to borrow indicate that you need money and that will not enhance your overall credit profile.
4) Diversify your credit
Don’t confine your borrowing capacity to just credit cards. Taking out bank loans, using department store credit, buying large ticket items on credit, a home mortgage are all indications that you are potentially in good financial health, able to secure credit from many reliable factions, thus enhancing your overall credit profile.
5) Monitor your credit score
Don’t wait until you need to use your credit line for a purchase to have your credit score scrutinized, operating under the mistaken belief that is the only way to obtain a free credit report. You can view your credit report for free at any time by logging on to sites like Credit.com and Credit karma.com. Getting into the habit of checking your credit report from time to time is a good idea, to ensure items that do not belong to you are not added to your credit report in error. You also want to be sure that creditors who have been paid in full report that information to the credit bureaus and your credit score is not being incorrectly lowered by outdated information.
Taking these five steps to manage and improve your credit score will ensure that when you need credit for a major purchase, it will be extended without qualifications.
Aiming to acquire a credit score of 720+ is ideal for possessing financial freedom and peace of mind.
As reported by financial editor, Jean Chatsky, during the Money segment of NBC’s Today Show on July 27, 2010.