Your Credit Score
Like it or not, your credit score has a huge impact on your financial and professional life. You already know that though which is why you have worked so hard to get a good or even excellent credit rating.
Generally, a score above 700 is considered a good score. An excellent score is one that is above 800.
Getting your score into the good to excellent range is hard work but once you get there, don’t think that you can relax. You need to do some things to maintain that score so you do not have to go through a rebuild again. Here is what you need to do.
1. Continue Paying Your Bills On Time
This plays a huge role in your score as you know.
Ironically, the better your credit, the worse a late pay would affect you. If you have a high score, you have much farther to fall than someone with a low score. A single late payment of 30 days has the power to drop your score 50 to 100 points so be careful.
If you are bad about paying bills on time, use email and text reminders. Consider setting up auto payments as well. The more that you can do to ensure that these things get paid on time the better.
2. Keep Your Balances Low
Credit Utilization also plays a huge role in your score. At the minimum, you should keep your balances on revolving credit below 30 percent.
The absolute sweet spot in credit utilization is 1 percent. Is it worth maintaining that level of utilization, probably not. Keep it in mind the next time you start thinking about a major purchase though.
3. Don’t Close Credit Cards
If you have paid off credit cards, the urge you have will probably be to close the accounts in order to avoid temptation. This is a huge mistake.
If you close a zero balance credit card, your debt will stay the same while your available credit goes down. This will increase your credit utilization and could lower your credit score.
The only reason to close a card is if it has an annual fee. This still might lower your score a bit but it there is no use paying money to keep your score up. If it drops, you can recover it in other ways, like asking for credit line increases on other cards.
4. Don’t Let Credit Cards Get Closed
Wait, this is the same thing right? Not exactly.
Once you have paid off those cards you know not to close them, great. You need to take that one step further though and make sure that the card issuer does not close them. It would have the same negative effect on your score.
If a card goes inactive, many issuers will close the account. You can prevent this though.
Usually one activity a year is enough to keep an account open but use your card once every 6 months to be safe. Just make a small charge and pay it off as soon as you get your statement.
That is enough activity to keep your card open and protect your credit score. It is a bit of a hassle but it is minimal and there will be no interest as long as you pay off your card when you get the statement.
5. Ask For Credit Line Increases
Since you now have a great credit score, now is the time to use it to increase your credit line limits. Call your card companies and ask for an increase in credit. You are more likely to get it when you do not actually need it.
Having high levels of available credit will protect you in case you suddenly need to use some of your credit. If you have to charge 1000 dollars but you have 10,000 dollars of available credit, your utilization is not that high and your score probably would not change. If you only had 3000 dollars in available credit though, you could wind up with a drop in your score.
The more available credit that you have, the better.
6. Limit Hard Inquiries
The amount of inquiries on your report is not a major ranking factor but it is a factor nonetheless. An inquiry will affect your credit for one year and will physically stay on your report for two years.
If you do have to apply for new credit, like for an ATV loan, try to do all of your inquiries at once. It is assumed that you will shop for the best rate and multiple inquiries at the same time are often considered as just a single one.
7. Monitor Your Credit
Credit monitoring services are free these days, so there is no excuse not to take advantage of one. Use the service that comes free with your credit card or sign up for something like Credit Karma. Credit Karma will advertise to you but they are easy to ignore.
A credit monitoring service will allow you to see your score continuously and will alert you about any changes that occur. With identity theft being so prevalent, it is something that you can not do without.