Maintaining a good credit score is vital if you ever use credit, work as an employee, or have insurance. It is your key to lower mortgage and loan interest rates. What is considered a good credit score can actually vary between lenders, but to obtain optimum interest rates and discounted insurance premiums you really should aim to maintain your score above 700, with 750 being even better. If you fall into the lower acceptable numbers of the 600’s then you may well end up paying higher interest rates on your mortgage and loans, and higher insurance premiums.
It pays to keep an eye on your score annually by applying for the free credit report you are entitled to once a year, and checking to see if any information is recorded inaccurately, which you can then get corrected.
Prior to the new changes in the credit card laws which came into place in February 2010 many credit card holders found that the companies had lowered their credit limits in anticipation of the changes, and by doing so their credit scores had decreased. Look out for any sharp practices by your lender, as this simple move impacted the amount of debt to credit ratio which people carried, without them ever doing anything themselves to cause a detrimental downturn of their score.
To ensure you maintain a good credit score arrange to make your monthly payments by automated debit for the full amount you have spent. This way there can be no question of any late payments or of incurring any interest. Unless it is a vital necessity that you spend more than you can repay at the end of the month then don’t do it, but save up the funds instead, as paying interest on a credit card is the first step into debt.
Be careful of your credit to debt ratios by never using more than 30% of your available credit on one card, as this has a definite negative impact on your score, even if you pay the full balance at the end of the month. It is better to split any necessary spending between two cards then go up to your credit limit on one.
Always maintain one card which shows the length of your credit history, so if you do have too many cards and want to close one down, opt for one of the newer ones. You shouldn’t apply for a lot of credit cards as this sends out warning flags, and it is better to mix the type of credit you use and split it between revolving and instalment credit. Avoid store cards as they do nothing but leave a bad impression, whilst a card from a reputable bank is looked upon more favourably.
Finally politely turn down requests to endorse a loan for someone else as their debt may well end up as your debt, and a very high ratio of co-signers end up saddled with the other persons debt. Even if they promise to make payments responsibly then the amount of the loan they obtain will affect your own credit to debt ratio.
If you are financially astute you can maintain a good credit score and definitely reap the advantages which come with it. You can even profit by it if you obtain a credit card which gives you cash back for all your monthly purchases, but you’ve little chance of obtaining a good one unless you’ve maintained a good credit score.