Keeping your credit score squeaky clean isn’t an easy thing to do, but the task becomes downright Herculean if you don’t have a plan to follow. For those who are looking to keep their scores well-polished and worthy of being a financial mantel piece, these 5 tips can be a sincere help.
1. Check Your Score
Everyone is entitled to a single free credit report once per year, and it’s important to monitor that credit report to be sure that it’s correct. Mistakes can happen, but if you don’t correct them then every creditor you have is going to see them. You need to know what your credit score is before you can take steps to clean it up. To get your free credit report click here, or call 1-877-322-8228.
2. Communicate With Your Creditors
When negative events happen in your life they can impact your credit. Losing a job, or getting a bad paycheck can mean no longer being able to make payments on time, or even at all. As soon as you know there are problems in your financial life you need to contact your lender and inform the company about your current issues. Many times a creditor will be willing to make accommodations like changing the date your payment is due, or reducing the amount you need to pay so that you don’t incur late payments. Your creditors want to be paid, and if you ask they’ll work with you to be sure your credit score remains clean while you get through tough times.
3. Be Reliable and On Time
Making a payment that puts you back on track to paying down a debt is a good feeling, but a good credit score is a lot like six pack abs; it’s all about long term dedication. It is better to make small payments regularly and in proper amounts than it is to make huge payments at uncertain intervals. A credit score is partly about how reliable you are, so it’s important to be predictable.
4. Apply For New Credit Sparingly
While it might seem counter-intuitive, your score will take a short-term hit when you obtain new credit. Whether it’s a new credit card, a home loan, or any other form of credit, having a new line of credit will make your score dip. The longer you have that form of credit though, and the more payments you make on it, the higher your score will rise. So it’s good to have established, long-term loans that are regularly being paid off, but getting too many of them can be hard to recover from even if you can make all of the payments.
5. Keep Credit Cards Open (Even if You’re Not Using Them)
While debt should be paid down quickly and efficiently it’s important to remember that your score is decided at least in part by how far back your credit history goes. So the longer you have open lines of credit the better, even if you’re not actually making purchases of substance with your credit cards. The point is how long you’ve had them, and how long they’ve been in good standing. Too much of a good thing can be bad, though. If you have a larger credit limit (open credit cards) than you can afford to have based on your income you may have a hard time qualifying for new debt so be careful.
The bottom line is to have a plan and take your credit score seriously. A little diligence can go a long way.
Article written by Byron W. Ellis, CFP®, CLU®, ChFC®, CRPC®, is a CERTIFIED FINANCIAL PLANNER™ professional and the Managing Director of Ellis & Ellis, a division of United Capital Financial Advisers, LLC, a Financial Life Management Company. Email us at firstname.lastname@example.org for your free copy of a Road Map to retirement.
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5 Tips For Keeping A Clean Credit Score