A good credit score is very important for financial success. You can describe a credit score as a three digit number calculated from your detailed credit report. This credit score is used to determine your worthiness for a loan, credit card or mortgage. It affects whether or not you will get approval for the service you are interested in and what interest rate you will be charged. A good credit score is generally any score above seven hundred.
The main aim of most people is to improve their credit score and to maintain it. This is important because throughout your lifetime, you will be subjected to various credit checks, e.g. credit checks for renters, credit checks for application of mortgages and many more. Although one cannot improve their credit score overnight, they can slowly but surely do it over a period of time through using a few approved methods.
- Ensuring that you pay your bills on time
Paying all your bills on time will significantly improve your credit score. We are only human and sometimes we forget to make timely payments. In order to avoid this you may set up an automatic payment system at intervals for when your payment is due. You can also set electronic reminders to jog your memory.
- Staying clear of your credit limit
Most people have a mentality whereby they stay as close to their credit limit as possible. This is wrong. When you stay too close to your limit, you lower your credit score. Many reports will show how close you are to being maxed out. It is advised that you only use thirty percent of your total credit limit.
- Do not apply for credit unnecessarily
Only apply for credit that you need. Applying for credit can sometimes turn into an addiction. You need to stay clear of making it a habit. When you apply for credit too often, you create an impression of an unfortunate financial state. Since your credit report will include recent credit activity, it is advised that you apply for credit as few times as possible.
- Eliminate nuisance balances.
Many people make the dire mistake of owning way too many credit cards. You will find that when you have more and more credit cards, you tend to use them all. A person, for example, may shop at a store for a total amount of thirty dollars with one credit card, then go into another store and shop for a total amount of forty dollars with yet another card. This type of behavior will hurt your credit score and lead to the accumulation of nuisance balances. If a credit card has a payment of a small amount of cash, it is advised to pay it off and cancel it. Use one card with a good interest rate and forget about the rest.
It is important to check your credit report on a regular basis and to make sure that the information that is reported is correct. A good credit score is a great improvement to the quality of financial investments that will be available to you.