Having a good credit score can save you tons of money. At some point in your life you’re going to need to borrow some money so you can pay for something like a house or a car. When that happens, lenders are going to look into your credit score to determine what type of rate they’re going to give you. If you have a better score then you’re going to get a better rate because it means that you’re a lower risk to lend to.
The most well know credit scoring company is FICO. There’s also VantageScore, PLUS Score, and a few others. However, you don’t really need to worry about all of them. All you need to do is worry about yourself and do yourself right. Do that, and all your scores will rise together.
So what do people with great credit scores do differently? How can you get and maintain a great credit score? Here’s the top 3 ways to do just that.
1- Pay your bills on time
One of the most important way that your credit score is calculated has to do with how well you’ve paid your bills in the past. You need to pay all your bills on time, and there’s just no way around this one. If you’re late, even once, it can hurt your score badly. Don’t be overdue on those bills!
How can you make sure you’re never late on a bill? You can be doing great with your bills and then all of a sudden your forget one month. It will ding your credit because you forgot to pay your bill on time. The credit report won’t show that you forgot to pay, it doesn’t care why you didn’t pay. It might be that you didn’t have the money to pay or maybe you just forgot, but either way your credit is hurt the same in both cases.
You can help make sure you always pay your bills on time by putting them on autopilot. Check with all the companies you have and put yourself on auto pay so that you don’t have to do anything to pay the bill each month on time. It will simply do it for you. If the company you’re paying doesn’t have a feature to pay each month automatically then you can go to your bank and have them set up a way to pay them each month through there. Most banks will have a way to do it, either by check or e-pay.
At the least, you should put a reminder on your phone or calendar. That way you can be reminded each month to do it. If you’re the type that likes to check the bill each month before you pay it then a reminder might be best.
2- Keep an eye on your credit
If you want to make sure that you have good credit when it comes time to borrow money then you need to be diligent about checking your credit. If you’re not going to be good about checking your credit regularly then you may want to pay a company to do it for you. Whatever you do, check it on a regular basis.
If you’re checking it regularly then it’s much easier for you to notice when something is off. Maybe you notice a credit card that was opened without your knowledge. Maybe it’s a loan that you didn’t make. Or Maybe the credit limit reported for one of your cards is wrong. Whatever it may be, you want to fix it if it’s wrong. These things can really alter your credit score. Making sure everything is correct is an ongoing battle these days with companies being hacked left and right.
If you’re one of the unlucky ones and notice some type of fraud you should deal with it immediately. It could take months, or worse, years to fix your credit because of fraud. The earlier you can catch the fraud, or mistakes, the better. That means you can stop the damage that’s going on and start healing your credit.
How do you check your credit?
If you don’t want to pay to get your credit monitored then do it yourself for free. You should try to check your credit at least two or three times a year. If you’re planning on taking out a loan for a house in the next year then you should try to check it monthly. Just make it a habit, like paying your bills on time each month. You don’t want any surprises when you find that house you want.
You can get a free credit report from each of the three major credit bureaus each year. That includes, TransUnion, Equifax, and Experian. Get your free report from each of these places each year and check them for anything amiss. If something doesn’t seem right then look more into it. If you can dedicated yourself to check your credit report at least three times a year, once each from each of these companies, then you’ll be doing great.
Checking your credit report is smarter than just checking your credit score. Your get your score from what is found in your report. So, finding out that your score is going down can get your attention, but it won’t necessarily tell you why it’s going down. Checking and fixing your actual credit report with the three credit agencies is your best way to go about it.
That being said, you can still get your credit score from a bunch of places for free. If you feel like just being lazy, then it might be easier to just check your score. If you notice your score hasn’t gone down, or it’s gone up, then that might satisfy you until you get a chance to check your report thoroughly.
A site like CreditKarma.com is a great place to go and get a free credit score check. They also monitor your credit if you want them to do that. Just sign up for a free account and get your credit score in a few clicks.
If you’re looking for a recommendation that is backed by the US government then look no further than the official USA.gov site. Their recommendation on that page is to go to AnnualCreditReport.com and get your free report from there. If you go to just one site then I recommend it’s this one.
3- Watch your credit used and available credit ratio
This is known as your “utilization ratio”. This is the amount that you owe on each of your credit cards as a percentage of the actual available credit for that card. If you want to have a high credit score then you want to keep the percentage of available credit that you use low for each card.
The lower you can keep that percentage, the better. You must always try to keep it below 30%, but if you really want to boost your credit score then you should aim for under 10% or even under 5% if you can do it. Lenders like to see that you aren’t using up all of your available credit.
It’s important to understand that you need to think of each card individually when it comes to this number. For example, if you have $10,000 on your credit card then you should be using $1,000 or less of your credit on that card if you want to keep it below 10%.
One way to do that if you spend a lot is to not let your balance get that high each month before paying it off. Paying off your balance three or four times a month might be necessary if you have a low limit card. Doing this can really help boost your credit score.
If you’ve been paying your credit card bill each month for a while then you might be able to raise your credit limit. This is another way to raise that ratio number quickly (Unless you start spending more with that new limit, that is). If they won’t raise your limit then it probably means you need to learn how to use your credit more wisely.
Try using only 10% or less of your available credit for all of your credit cards and paying them off on time for a few months. Use cash for everything else. In time, you should raise your credit score which should allow you a chance to raise your credit limit on your cards.
Set alerts through your bank to keep spending in check
If you want to stay under that 10% number you need to be on top of your spending. Your bank should be able to help you do that. Log into your account and you’ll find a way to get an email or text message whenever you reach a dollar threshold that you’ve set. Set your alert below that 10% mark and be sure you pay off your credit card every time you get that alert. Then, check your credit score and watch it rise. A year of this and you should be more than ready to raise that credit limit assuming you’re paying all your bills on time as well.