Good credit ratings can take years to build up but only take a day to tear down. These nine steps can help keep your credit rating strong now, as well as far into the future.
1. Pay your bills on time. – Perhaps the most important factor for your credit rating, the fewer late payments you have, the better you will look to lenders, resulting in a higher score.
2. Keep a low credit utilization ratio. – Using less of the credit available to you makes it less likely you will fall behind on your bills and it gives you a way to pay for emergencies if the need arises.
3. Refrain from applying for too many lines of credit. – Whenever you apply for a new credit card, auto loan, home loan, etc., a “hard” inquiry is put on your credit report. This means that someone looked at your credit to see if they would be willing to lend you money or give you credit. Too many inquiries can lower your credit rating slightly, but they tend to fall off of your report after two years.
4. Be sure to pay taxes and student loans. – Tax liens and federal student loans are the only types of debt that stay on your credit report past the maximum 7 year statute of limitations. A tax lien is very bad for your credit while it is unpaid, while a student loan just needs to be serviced.
5. Validate debts from collection companies. – Anytime a collection agency pops up on your credit report, ask them to validate the debt, requiring them to provide proof that you actually owe them money.
6. Check your credit report for errors. – Mistakes happen seemingly all the time with credit reports. Someone with the same address, similar name or similar social security number might have accounts on your report.
7. Keep older accounts open. – Older accounts tend to show lenders that you are responsible enough to stay in good standing with a company for years, making you a good credit risk.
8. Offer to settle charged-off accounts. – While settling charge-offs will not return your credit to what it was, it can cause your score to go up somewhat.
9. Use different types of credit. – Only having credit cards or auto loans, etc., makes lenders a bit wary about your ability to take care of different types of debt. Having a good mix on your report should keep your score fairly high.
Those with good credit are usually responsible with their finances, making sure everything is paid on time and that they do not take on more debt than they can handle. By following the steps above, you should see your credit score at least stay the same and probably rise over time.