7 habits that will help maintain a good credit report

7 habits that will help maintain a good credit report

A good credit report brings along several advantages, including better savings in the long run. People with good credit scores achieve reduced interest rates not only on personal and student loans but also on mortgages and credit cards. This leads to lower monthly payments and better savings in case of an emergency or as a retirement fund. Here are some tips and tricks that can help maintain a good credit score report.

Prioritize bill payments

The key to good credit report maintenance lies in the timely payment of bills, as payment history is one of the most important factors in determining the credit score. Also, many creditors charge late payment fees, so paying on time will eliminate this additional liability. To prevent late payments and defaults, you can sign up for automatic bill payments offered by most bank accounts and credit cards. You can even set reminders on your mobile phone about upcoming payment dates. You can decide on a single date each month to settle these bills and payments.

Ditch the cash

Good credit report maintenance involves using credit cards more than cash as transactions made through credit cards can be accounted for. This also lets the credit bureaus realize your spending ability and improves your credit scores. Instead of using credit cards only for larger purchases, use them for small items to boost credit scores.

Restrict your credit utilization ratio

The way to good credit report maintenance involves limiting the use of available credit, as using more credit can adversely affect scores. The solution to this is to increase the limit of credit cards as it will give you greater freedom to spend while keeping a balance. A credit utilization ratio that crosses 30% could result in lowering your credit score.

Keep a regular track of credit reports

For good credit report maintenance, check your credit report at regular intervals. This will give a complete overview of the repayment history of loans and credit cards. The credit score is calculated on this history, and regular checks aid in eliminating any possible errors. These credit reports are available free of cost once every year and can be availed of from any of the credit bureaus. There are also various financial online marketplaces that offer free-of-cost credit reports and monthly updates.

Keep credit card accounts active

Post loan payments, most people close some of their credit card accounts. However, if the payments were made on time and were paid in full, these debt records can be useful to boost credit scores. Maintaining an account that has a regular and timely payment of bills emphasizes responsible behavior to lenders and creditors. It also has a positive impact on your credit score. Closing an account may reduce your credit score as it will lead to a lower maximum credit limit.

Use only a few credit cards

Applying for multiple credit cards adversely impacts credit scores. Every time you apply for a credit card, you are subjected to a hard inquiry. There are multiple hard inquiries when you apply for many cards; this shows excess debt. Also, it is also vital to restrict yourself from using various credit cards for a short period or when you have taken an enormous loan similar to a mortgage.

Select the right set of credit cards

There are several types of credit cards that can be customized to individual requirements. For example, there are cash-back cards that provide returns on buying fuel and groceries. The points accumulated on these cards let users achieve better savings. However, it is important to analyze the annual fee on these cards, the kind of rewards it is offering, and whether using them will prove profitable or not.

With these tips, you should achieve and maintain a good credit score.