Credit, for most people, is a complicated thing. Credit reports reach back into what seems the ancient past, bringing to light all of your financial blunders. And yet, good credit is required for so many things these days, even for must-have things such as cell phone contracts. So how can you keep your score in good standing, and keep your credit report clean? Here are four things you can do to keep your finances and credit history in line.
It isn’t always possible, but if bankruptcy can be avoided, your credit score will thank you. Bankruptcy is understandably one of the most devastating hits to your credit report.
Declaring bankruptcy – or stating to the court that you cannot repay your debts – goes immediately to your credit report and stays there for a full seven to 10 years. With a bankruptcy on your record, you will likely be denied various forms of credit for years to come.
Pay Bills on Time
Late payments are one of the quickest ways to tank a credit score – not only do they hit hard, but they stay on your credit report for more than five years.
If you find yourself in a situation where you know you will have to make a late payment, always reach out to your creditors before the payment is due. They will almost always work with you to schedule the payment for a later date. Sometimes, they can even delay the due date for weeks or even months. This will give you a bit of breathing room while you try to get your finances back on track.
Keep Credit Balances Low
It cannot be stressed enough – maxing out your credit cards will bring your score down quickly. Utilizing all of your available credit makes it look like you’re not paying it down.
You should use about 30% of what is available to you. This will show lenders that you can responsibly manage your finances and that you have not overextended yourself. And if this is the case, you might wonder why not just keep your credit balances to zero – but that won’t help. In order to show that you can use credit wisely, you have to use some of it (just not all of it).
Apply Rarely for Credit
If you’ve got your payments made on time and have managed to keep your balances low, you’re already off to a great start. Now keep your score high, make sure that there are very few inquiries showing on your report. An inquiry is made every time your credit is checked, such as when you apply for a loan or rent a new apartment.
Applying for a new credit card results in yet another inquiry. If you apply for a lot of cards, those multiple inquiries can bring down your score, as it shows that you seem to often need credit. Outside of what you absolutely need, you should always keep the number of inquiries on your report to a minimum. Remember that there will be times when you will need to have inquiries made.
Difficulties with debt and credit may feel overwhelming, but there truly is always hope. There are many ways to get back on track if you’ve stumbled along the way. Accepting an offer to consolidate is often a great first step on the path toward financial stability.
Following the four tips in this article should help you to work toward achieving your credit goals. It may take time, but it will be well worth the time and effort. Having good credit can make so many things easier in life!