Maintaining a good credit score brings with it many benefits, including getting a low-interest rate on your loans. A good credit score can help you manage your finances better and avoid any money-related problems later on.
According to a report by Experian, just 21% of Americans have an exceptional credit score. Protecting your credit score comes in handy during uncertain times and helps you sleep better at night. Let us look at the following ways to maintain a good credit score.
1. Automating all your bill payments
To maintain a good credit score, you should consider automating all your bill payments. That will include regular payments that go out of your bank account towards any dues related to your loans, credit cards, brokerage, or even payments towards your mutual fund accounts.
Any delay in these payments may end up negatively impacting your overall credit score. If you do not automate such payments, you may inadvertently miss out on paying a bill, and if you do that, your credit score will be adversely affected. To make direct payments and deposits, you may have to void a check.
If you’re setting up regular payments from your bank account to a vendor, you may need to give a voided check to them so that they can verify your banking information.
Read all about how to get a voided check to understand how you can get a proper voided check that you can then forward to the recipient of your regular payments.
2. Don’t take too many loans at the same time
It is vital for you not to take multiple loans simultaneously for personal, business, or other purposes. Signing up for too many loans at the same time can severely impact your credit score.
You should prioritize the loans you actually need based on your current financial requirements. Doing so will help you avoid a poor credit score. Keep in mind that unsecured loans such as personal loans may affect your credit score.
While personal loans may initially help raise your overall credit score, keep in mind that if you miss out on any payments, your credit score may suffer a severe hit.
3. Pay all your dues on time
Along with automating all your bill payments and paying off loans, you should pay all your dues on time. These dues could be in the form of credit card bills, utility bills, and more.
You should try and avoid “buy now, pay later” services that may damage your credit score if you irresponsibly use them. Paying all your dues on a timely basis will ensure that you stay away from having to pay any extra interest that you’ll inevitably incur in case of delayed payment.
4. Don’t close old credit card accounts
Closing old credit card accounts is not advisable as it may negatively affect your credit score. Credit score agencies will have a database with your credit history and will also be tracking whether you’ve been paying your dues on a timely basis.
You should maintain unused credit card accounts for as long as possible so that you benefit from a longer average credit history.
5. Track your credit score regularly
Keeping a regular check on your credit score will help you fully understand your financial situation. By tracking your credit score regularly, you can avoid missing out on any action that may negatively affect your credit score and will be able to take corrective actions if needed.
You can also assess past errors you may have made and how those actions impacted your credit score. Doing so will help you stay alert in the future about the different factors that may play a role in negatively or positively affecting your credit score.