Many things in life are better with a higher score. Think about tests, or most competitive sports.
Credit scores follow that same pattern, making it easy to remember. The closer your score is to 850, the ‘perfect’ credit number, the better your credit looks to lenders.
Unlike football or soccer, though, credit isn’t a game. But you can still follow some rules to help out your score. Here are four of our top tips on how to keep your stress level low and your credit score high.
1. Pay your bills on time
It may seem obvious, but paying your bills on time is one of the most important ways to keep a high credit score. After all, payment history influences 35% of your FICO® score, making it the largest factor.
If you often forget to pay your bills, there are a few ways to fix that. One is to sign up for automatic bill payments, which take the money out of your account so you don’t have to worry about it.
But if automatic payments aren’t your style, you can always set reminders. Some bank accounts and card providers offer these bill reminders through texts, emails, push notifications, and more. For a more personalized approach, consider setting up a calendar to track when to pay each bill.
2. Don’t overextend your credit
The concept of credit may seem flexible, but in reality, it isn’t. Just like you shouldn’t spend money you don’t have, you should be mindful of your credit limit.Some credit card issuers, for example, do allow you to spend more than your card’s limit. But this practice drives fees up and your credit score down. It’s best to avoid maxing your card out. In fact, it’s actually good to avoid getting close to the limit altogether. Creditors look at your credit utilization ratio, which is the amount of credit you use versus the amount of credit extended to you. The Consumer Financial Protection Bureau recommends keeping this ratio at or under 30%. If your credit limit is $1,000, you should use no more than $300 at a time, for example.
This practice goes toward how you open credit accounts, too. Opening multiple credit accounts all at once can be a negative sign to lenders. Only open credit accounts when it’s necessary — and only when you know you can pay them off.
3. Keep old credit accounts open
It may be tempting to close or “clean up” credit accounts you aren’t using as often, but that could actually hurt your score more than help. That’s because credit lenders look at average credit age — and the older, the better. Successfully managing credit accounts over the years shows the kind of long-term responsibility that lenders favor.
If you closed these accounts, their information would still remain on your credit report, but it doesn’t stay there forever. Closing them could also lower your available credit and raise your credit utilization ratio, hurting your overall credit score. Instead, it’s best to keep the accounts open unless you have to close them for another reason.
4. Fact check your credit report
Three major agencies collect data to make credit reports — Equifax, Experian, and Trans-Union. Once a year, you can request a free credit report from each one at AnnualCreditReport.com.
It’s important to keep an eye on your credit to make future financial decisions. But it’s also crucial to go through this report with a fine-tooth comb, because some of it may be incorrect. In a Federal Trade Commission study, 26% of participants reported at least one error in their credit reports that hurt their score. Common mistakes included misassigned credit accounts and incorrect payment history reports.
You’ve worked hard to maintain your score. Make sure you get the credit.