Credit scores play a critical role in most of life’s major financial decisions. They can determine if you qualify for a loan and many affect the interest rates applied to that loan. They’re also a factor in approving new credit cards and home rental applications. In general, higher credit scores indicate a lower risk for lenders, and improving bad credit can take years. Here are some tips for maintaining a healthy credit score.
Know Where You Stand
Knowing your current credit score is the first step in determining what you should do next to achieve or maintain a healthy credit score. The 2016 Consumer Financial Literacy Survey revealed that barely half (56%) of all adults have checked their credit score once in the past year. VantageScore and FICO® Scores are two of the most common types of credit scores. Both generally range between 300 to 850. A VantageScore above 700 is considered to be good, while 750 or higher is considered to be excellent. A FICO Score above 670 is considered a good credit score on these models, and an exceptional credit score falls at 800 or above. Learn more about credit scores on Experian.com.
Regularly Check Your Credit Reports and Scores
Monitoring your credit reports from all three credit bureaus – Experian®, TransUnion®, and Equifax® – gives you the details behind your status, such as which accounts are in good standing, or which have had negative activity, such as past due payments or transfers to a collection agency. Regular report check-ins can also help you detect identity theft in the form of unfamiliar new account openings or changes in your contact information. Additionally, by checking both your credit reports and scores regularly, you’ll have a better idea of the factors that are driving your scores higher or lower.
Pay Your Statement on Time
Lenders typically look for a proven track record of timely payments and low monthly balances. Consider setting up auto-payments or electronic reminders to ensure you meet payment due dates. Lenders also generally prefer a long history of timely payments. Thus, you should consider keeping all of your accounts that are in good standing open, even if you don’t actively use them anymore. That’s because closed accounts will eventually fall off of your credit report, causing you to lose some of your good “history” with lenders. When it comes to credit, you not only want to pay your current bills on time, you want to show lenders that you have a history of doing so.
Staying informed and paying your bills are both key to maintaining a strong credit score and remaining a step ahead of identity theft. Do you have other tips that keep your credit score healthy? Join the conversation on Facebook, Twitter or LinkedIn.