Credit can be as complicated as you want to make it, or it can be elementary. It’s your call. Here are seven ways to keep your credit 👌
1. Only apply for the credit you need
There are generally two ways you can get credit – by applying for it or getting it given to you. Our philosophy on credit is straightforward. Only apply for the credit you need. If you need to establish your credit rating apply. If you need a mortgage apply. But if you don’t need a new credit card or a line of credit don’t apply. But let’s say you are getting a mortgage and your lender offers to give you a no-fee credit card or line of credit, always take it. Further, if you get one of those pre-approved offers that don’t need a credit check, always accept those too. But only if there are no fees. See point four for the reason why.
2. Always make your payments on time
Making your payments on time is the single most crucial thing you must do to keep your credit score high. Technically you have 30 days after a payment is due before a missed payment affects your credit, but why risk it. Your payment date should be your payment date, so get used to it being a hard deadline and make your payments on time.
3. Use and pay off your credit cards every month
There are many reasons to use your credit cards every month. They include keeping your cards and credit active and taking advantage of incentives like points and cashback. Just make sure that when you use your cards, you pay them off every month. We pay off our credit cards every two weeks to make sure we aren’t spending more than what we have. It’s a good practice to get into.
4. Keep your ratio of used credit to available credit low
In 2019 one of the most significant factors affecting credit is the use ratio. The use ratio is the amount of credit you have available compared to how much you are using. The lower the percentage, the higher your credit score. As you start to get close to using all the credit you have available, your credit score starts to go down. The key is to keep your balances low compared to the limits.
5. Diversify your credit
Credit agencies like it when people show they can manage different forms of credit. If you show that you can manage a car loan, credit card, line of credit, and a mortgage, your score will be better than if you just have a credit card. That doesn’t mean go out and apply for a bunch of different types of loans, but over time if you happen to have different types of credit, it will help. That said, not applying for the credit you don’t need is more important than having diversified credit.
6. Don’t Hold Back Payment in a Dispute
Don’t hold back payment in a dispute with a creditor; this is especially true for telephone companies. If there is one type of creditor that will ruin your credit in a dispute, it is the phone company. If you get a bill that you think is unfair, pay it and then fight for a refund. You can use the fact that you paid the bill as leverage to argue for the refund, and usually, you will get it. Companies like customers that pay their bills. Thus, if you can tell them you paid the bill but are unhappy, they will usually work with you to keep you as a client.
7. Don’t Close Old Credit Cards
No matter what Dave Ramsey tells you, don’t close old credit cards that aren’t costing you any money. You can cut up the cards if you have trouble not using them, but don’t close them. The longer your accounts are open and the more that is available to you, the better your credit score. Thus, closing accounts actually hurts you if you go to get a mortgage or need a loan. Don’t do it. Find another way not to spend. We are all adults here.
Bonus – Monitor Your Credit
There are many ways you can monitor your credit. The best is by signing up directly with a credit agency like Equifax. Be careful of companies that sell loans and offer free credit monitoring as a gateway to get you using their platform. It is usually the first step in a sales pitch.
