In February 2021, 698 was the average credit score in the US. This is at the top of the fair range.
Knowing your credit score is important, but there is so much that goes into it, it can get very confusing trying to figure it all out. On top of that, there are many simple mistakes you could be making that can work against you when trying to raise your credit score.
But don’t worry, in this post, we’ll go over mistakes to avoid and how to keep a good credit score.
Keep reading to learn more.
Pay All Bills on Time
The most heavily weighted factor when determining your credit score is your payment history. Lenders want to see that you have a history of making all of your payments on time. People who have many missed payments in their history will have a lower score and will be considered riskier to lend money to.
Make sure that you’re paying all of your bills on time. To help with this consider automating your bills so that even if you forget about a payment they will still be taken care of.
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Maintain a Low Revolving Credit Utilization
Even if your credit card or line of credit offers you access to a lot of money, lenders are not looking for you to be using it all. Your credit utilization is just the ratio between the amount of credit you’re currently using and the total amount you have access to.
Credit bureaus consider higher credit utilization to be riskier because the more credit you’re using, the smaller the chances are that you will be able to pay it off before the statement closes.
The general consensus is that you should keep your utilization under 30% when possible, the lower the better. If you can, try to pay off all of your balances by the end of each month.
Keep Old Lines of Credit Open
When considering how risky it is to lend someone money, one of the things the credit bureaus consider the most is how old your oldest line of credit is. If it is still relatively new they will consider you unproven and therefore riskier.
When you close a line of credit that history will eventually be removed from your overall credit history, likely lessening the age of your overall credit history.
Closing old credit cards and lines of credit also lowers the amount of available credit you have, which makes keeping a low credit utilization ratio more difficult
Monitor Your Credit
One final thing you should do to maintain a good credit score is to monitor your credit regularly. While you may be doing everything right, other people can still make mistakes.
By monitoring your credit score you can make sure there aren’t any errors that are resulting in a drop in your credit score. Additionally, this is a good way to keep an eye out for any signs of fraud or identity theft.
Learn How to Keep a Good Credit Score
Your credit score is an important part of your overall financial health. It is critical that you pay attention to it and learn how to keep a good credit score.
Do you have any other tips for how to improve your credit score? Let us know in the comments!
