How to Protect your Good Credit

The importance of having good credit is more pertinent today than at any other time, as lenders tighten their criteria. Many people have worked hard to re-establish good credit and many of those new to credit have been careful to establish a good credit reputation. Having attained a credit file to be proud of it is vital to protect and maintain a good score, as it is far easier to lose good credit than it is to re-build it.

The fastest way to ruin your credit is to become sloppy and start to pay bills late. The simplest way to ensure that all bills are paid in a timely fashion is to arrange automated payments for all obligations. Whilst carrying a credit card balance will not have a detrimental affect on good credit as long as the minimum monthly payments are met, it is far better practice to clear the balance in full each month to avoid compounded interest payments.

This allows those with good credit to take advantage of cash back credit cards without negating the benefits by carrying a balance. There are some credit cards which offer rewards for those who make their monthly payments on time, and it pays to take advantage of these offers.

Paying off credit card balances in full each month can lead to the mistaken belief that this protects good credit. However anyone who utilizes a high percentage of available credit each month, and then clears it in full, is actually using their credit in a way not appreciated by the credit scoring system. Ideally no more than 30% of available credit should be used. The simple answer is to increase credit limits on available cards and keep within 30% of debt to credit ratios, or open more cards to increase the available credit.

It is known that credit scores can fall if too many new lines of credit are either applied for or opened. However if new lines are opened gradually this has little impact on credit scores and does allow you to take advantage of opening new credit cards to both increase available credit and to take advantage of opening statement credits which some card issuers now offer to those with good credit.

Closing open lines of credit will not have a detrimental affect on good credit if it is done gradually. Thus those who utilize balance transfer cards can cut up the new card once the transfer is complete without affecting their credit. Conversely closing credit cards which represent long term credit history is a mistake and these should be kept open and occasionally used.

It is recommended that the three main credit reports provided by Equifax, Experian and TransUnion are checked at least once a year. Each major credit bureau will provide one annual report free of charge, and if errors are spotted they can be repaired by contacting the agency which has reported erroneous information.

Previously obtaining credit scores meant paying a fee. A new amendment to the FACT Act means that anyone who is not offered the best advertised interest rate on loans and credit cards is entitled to a free credit score from the lender. Those with good credit may well not obtain the preferential rates offered to those with excellent credit, and in such circumstances can now have free access to their credit score and thus work to improve it.

The good news is that a high percentage of people never encounter problems with their credit rating by using credit in a sensible way. If you are aware of the financial behaviour which can negatively impact on good credit it is easy to avoid the common errors and thus protect your good credit.