Credit scores are essential for measuring good or bad financial health. In this article, we will look at 5 Smart tips on maintaining a good credit score. Credit rating helps inform lenders on how an individual uses credit. New loans or credits approvals are easier with Good credit ratings. High credit ratings could be a route towards getting the lowest interest rates in the market. It is important to understand how to get and keep a strong credit rating.

The following points may help you in understanding, analyzing, and maintaining positive and good credit score:

Pay your loans on time for Good Credit Score.

The keyword here is ‘on time!’ Not late, and not early. Many people may think that paying off loans early improves credit; however, if you pay the loan early, the other installment loans will appear closed on the report; hence, it might negatively effect the ratings.

Considering this, to maximize credit score, pay loans in agreed installments while ensuring you have adequate savings. One can achieve on-time payment by setting electronic reminders or automatic payments.

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Keep your credit utilization at 30% or less.

In other words, keep far from your credit limit to ensure that you are also far from being maxed out. The easiest method to ensure that credit utilization is in line is paying balances in full for every installment.

If you can’t do that, the thumbs-up principle is keeping the remaining fee at 30% or less of the full credit limit. One can use a credit card’s high balance alert functionality to seize adding new charges when credit utilization is high.

Fatten up your thin credit file for Good Credit Score.

A thin credit file implies you do not have enough credit experience to generate a score. Fortunately, one can fatten their thin credit file via various methods, including Experian boost and UltraFICO, programs that collect financial information that is not in your credit report.

There is also the option of providing rent report payments if you are a renter, and one can use resources like Perch – an app that reports rent payments.

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Keep in check your requests for hard inquiries and new credit.

There are “soft” and “hard” inquiries of which soft inquiries may not affect one’s credit ratings. However, a hard inquiry can negatively affect a credit score from two months to two years. A hard inquiry includes applications for a mortgage, a new credit card, or an auto loan.

Many of these applications in a short time can lead to a bad credit rating as the bank can assume that you are facing a financial crisis. This leads to the principle that one should only apply for the credit that they need.

Check for errors in your credit reports.

The potential errors in the credit report of any individual are sometimes responsible for dragging down the credit rating, hence it’s advised to go through the credit report and check for disputes or errors for correction. These errors may include clerical or financial errors and are responsible for degrading the credit rating significantly.

It’s advisable to check the credit report regularly, in due time. Hiring a bookkeeper, accountant, or consultant for getting financial checks of the credit report is proven good practice.

Conclusion ( Good Credit Score )

The bottom line, if you are planning to get a loan for your new car or a new home, it’s crucial to maintain a good credit score. When you start following the path towards a good credit rating, it can take up to several weeks or months to observe a positive impact on your credit score.

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