A good credit score is necessary, especially if you have plans of acquiring loans in the future for a home or car purchase, wherein paying with cash upfront may not be deemed as a viable solution. Your credit score will significantly affect your ability to quality for any kind of loan in the future. Having a good credit score can become your ticket to get a loan with affordable interest rates. A bad credit score might still allow you to apply for loans but if ever you get one, you’ll be forced to pay it with expensive interest rates that can possibly affect the quality of your life in the long run.
This is just one of the reasons why there’s a need for you to maintain a good credit standing. Therefore, here are some tips to ensure that you have an acceptable credit score that will guarantee you a loan approval.
Settle your dues on time
In order to maintain a great credit standing, one of the basic things you can do is to pay your dues on time. Settling your bills even before the due date will guarantee a healthy credit score. While certain bills are not reported to credit bureaus, they may still have an impact on your credit score in the event that you fall behind the necessary payments.
For you to settle your dues on time, make sure to create and stick to a budget. Having a budget will make it easy for you to pay your dues on time without compromising your day-to-day expenses. Overtime, your budget will allow you to live a comfortable life even if you’re only earning a sufficient amount of salary.
Moreover, you can settle your dues on time by making adjustments to your lifestyle. If you have to pay a lot of bills in a month, for example, avoid compulsive buying. You can also look for part-time jobs so you can earn a little money on the side. And most importantly, never borrow money to pay your dues as this can only create bigger financial problems in the future.
Maintain a low credit card balance
While credit card companies provide you with a certain credit limit, avoid getting the impression that this is an extra cash for your perusal. There is a great possibility that if you have a higher balance in relation to your credit limit, your credit score will be worse. A good rule of thumb is that all your credit card balances should only account for at most 30% of the sum of all your credit card limits. Charging more than this is often risky, even if you intend to pay off the balances before your due date.
Ideally, before getting a credit card, you should know what you’re getting into. For one, you should ask yourself, “Do balance transfer affect credit score?” or “Is there any way I can use my credit card to improve my credit score?” The answers to these questions will help manage your expectations and assess if your credit card can actually help you in your goals of maintaining a good credit score.
If you can’t handle the responsibilities of owning and using a credit card, it’s best if you don’t apply for one. Having a credit card is an important responsibility, and not knowing how to handle this can lead to debts and even bankruptcy.
Manage your debts
You can manage your debts by initially making a list of all your dues, together with the due dates of each. This is to ensure that each of your payment dues are settled on time until the entire balance is paid off. Your credit card balances are not the only accounts that affect your credit score, but all your other debt and loan balances as well.
Monitor your credit report
It is a good practice to check your credit score from time to time in order to perform the necessary measures if it starts dwindling down. Additionally, monitoring your credit report will allow you to immediately verify and ask for corrections for any error that may unintentionally transpire in the report. A thorough monitoring of your credit score will also help you to track credit card frauds and report any discrepancies promptly.
In addition to this, it is important to know what goes into your credit score because knowing sufficient details will make it easier for you to maintain a good credit standing. Generally, your payment history, level of debt, credit age, a mix of credit, as well as your recent credit, are the factors that affect your credit score.
A good credit score is vital in your future endeavors in terms of loan applications. It can also be that a good credit standing will pave the way for you to be eligible for lower interest rates. Thus, it is highly recommended to put up your best efforts to maintain a great credit score, which will prove to be beneficial for you in the long run.