According to Equifax, a good credit score ranges from 670 to 739 depending on the scoring model. 580 to 669 are generally considered fair while scores from 800 and above are excellent. With a good credit score, you have access to higher credit limits, better negotiating power and lower interest rates among other perks.
You could increase your credit score or maintain a high score by healthy financial practices such as avoiding or fixing credit card errors. This article highlights some tips and tricks that have been proven to work. It is important to note that while there’s no exact blueprint to building a high credit score, these tips are guaranteed to give it a bump upwards.
- Avoid spending close to your credit card limit
The scoring system closely monitors your spending pattern and how close you are to the total credit limit. Being maxed out too often hurts your credit score as opposed to a having more than 50% room in your balance left. That said, putting all your credit card balances in one account will also lower your credit score as you’d be using a higher percentage of your total credit limit. For the best score, have multiple credit accounts with your credit use below 30% of your credit limit. Most importantly, be sure to pay off the balance each month.
- Always pay off your credit loans on time
Paying off your credit loan by month’s end regularly is a sure way to maintain a good credit score. You could set up automatic payments to reduce the chances of forgetting, or have electronic reminders to avoid missing payments. Besides paying your credit card loans each month, ensure you pay off the full amount, not just a part because the interest charged will be on the full amount according to the annual percentage rate of the credit card and not the amount left to be paid. However you can avoid paying interest while maintaining a good score on your credit card if you pay on time and in full.
- Audit your credit reports
Credit reports are error-prone and could negatively impact your score through no fault of yours. These errors can be caught early by a periodic review of your credit report before any damage is done. Even so, poor credit scores as a result of a credit card error could be disputed and amended. Be sure to audit reports of all credit accounts both old and new as they have similar influence on your credit score. Old cards are also susceptible to identity theft and card misuse.
- Avoid applying for unnecessary credit
Applying for more credit than the usual in a short time-frame is perceived as an indicator of a negative economic situation even if it might not truly be the case. The credit scoring system analyses your recent credit activity and a sudden need for more credit can cause a drop in your credit score.
- Having a long credit history
Credit scores are built over time based on usage and history. Having a long, credit-smart history shows that you are a good credit recipient. The more history your account has, the more information for analysis and the higher the chances of a positive evaluation.
Benefits of Having a Good Credit Score
Benefits of a good credit score influence your quality of life. They come as a reward for healthy financial living. These benefits include;
- Better rates on car insurance
- Better rates on other types of insurance
- Lower interest rates on credit loans
- Access to higher bank loans
- More housing options
- Higher credit limits
Tip: If you are new to credit, consider getting a product designed to help you establish and build credit. Financial institutions have developed an array of products and services, such as secured credit cards and credit builder loans, tailored to helping consumers new to credit to establish and build credit.
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