Tips for Maintaining Good Credit

For most people, building good credit is a long battle fought through financial ups and downs, a long history of on-time payments, and keeping their debt under control. If you have good credit, you should be congratulated because that is a great accomplishment in these times of economic upheaval. But you shouldn’t rest on your laurels.

Many people with good credit fail to realize it’s easier to slide backward than keep moving up on the credit scoreboard. And, when the difference of 25 or 50 points on your credit score can also mean the difference between two or three points on your interest rate, it pays to stay on top of your credit. With that in mind, here are five important tips for maintaining good credit:

Review Your Credit Report Often

Your credit activities are reported daily to the credit bureaus, and it’s not unusual for them to make mistakes when updating your credit report. Any misreported items can negatively affect your credit score – a misreported credit line, incorrect payments, and sometimes even a misplaced account opened by someone with a similar name. The credit bureaus are responsible for correcting errors immediately, but you have to know when they occur. Your credit report contains a lot of personal information compiled from several data sources and sometimes captures incorrect data.

At the very least, you need to review your credit reports three times a year. You can order a free credit report from the three credit bureaus – Experian, TransUnion, and Equifax. You should order each report at four-month intervals, though remember that each credit bureau reports its information differently. The best option is to subscribe to a credit monitoring service that tracks and reports your credit activities weekly or monthly. They notify you instantly of any negative item reported on your credit reports. Many banking institutions offer free access to a credit report from one of the credit bureaus. Checking your report regularly can also help you avoid becoming a victim of identity theft.

Use It or Lose It

The key to maintaining good credit is to use your credit. Some people believe you can’t hurt your credit score if you just put your credit cards away and don’t use them. Actually, the opposite may be true. Your credit score is a measure of how well you manage your credit, so the credit bureaus need to see that you are using it and that you are using it wisely.

Even if you charged your normal budgeted items, such as gas and groceries, and then paid the balances in full, you will create a continuous payment history that reflects positively on your score. Not using your credit or closing accounts can cause your score to go down.

Keep Your Balances Low

If you do have the occasion to charge up your accounts with a major purchase, keeping your credit balances low in relation to your credit limit is critical. Anytime your credit balance exceeds 30% of your credit limit, it can negatively affect your score. If you have to, you can transfer balances around to ensure that none of your accounts exceeds that threshold.

Put Variety into Your Debt

This is not a recommendation to go out and add more debt; however, if all of your debt consists of credit card debt, you could be hurting your score over the long term. The credit bureaus would like less reliance on credit card debt and a greater variety of debt. So, if you need a new appliance finance it with an installment loan. Adding an auto loan can also help your credit. Just be sure to keep your total debt payments at 25% of your income.

Keep Your Credit Requests to a Minimum

If you have good credit, you are probably being targeted by every credit card issuer with great offers that include 0% introductory rates. While these can help you improve your debt situation by transferring high-interest debt to low or zero interest cards, they can hurt your credit score, at least temporarily.

Whenever you apply for a loan or a credit card, an inquiry shows up on your credit report. One or two of these may not harm your credit score, but if a pattern develops over time that shows multiple inquiries, the credit bureaus will knock your score down. New credit accounts will also lower your score temporarily until you start using them and demonstrating on-time payments.

Maintaining good credit doesn’t have to be a full-time job, but it does require a constant awareness of how your daily credit activities can affect your credit score. Staying on top of your credit is easy if you follow these simple tips and remember that your credit score never remains the same – it’s either going down or up. It takes a bit of proactive management to ensure that it keeps going up.