Getting a Healthy Credit Score and Keeping It
Do you have strong desires to own your first house? Maintaining a good credit score is important, especially when you are young and have many years of borrowing ahead of you. If you are under 30, try not to over-borrow. When you plan to buy a house, you will need to be almost debt-free to ensure a low-interest rate. If you have student loans, you should strive to pay them off as soon as you’re able.
Today, we will talk about ways to get a good credit score and how to maintain a healthy credit score when you already have one. You don’t need a max credit score to get the best deals when buying a home or a car; you do, however, need a score that’s considered healthy by most lenders’ standards.
There are essentially four credit scoring ranges. A score less than 629 is considered poor. A credit score between 630-689 is considered fair. 690-719 is considered a good credit score, and above 720 is looked at as excellent. Most financial institutions will consider a score over 720 is worthy of getting top billing.
Here are some of the many things you can do to ensure your credit score is not only good but stays that way. By striving every day to be fiscally prudent you will put yourself in a better position to become a homeowner, get the best rates on a car and have favorable credit card terms.
Grab a cup of coffee and let’s take a look at these credit improvement tips:
– Pay your credit card off every month. That way, you will keep a higher credit score than you do when you constantly have a balance on your credit card.
– Treat all debts equally by paying them all.
– If you have old unused credit cards, keep them open, as they will look good on your credit report, even if you are paying an annual fee!
– Set up electronic deductions to ensure that everything is paid on time, including your utilities and phone.
– Don’t run your credit card up. Do not spend more than 30 percent of whatever the limit is; keep the balance low or paid off!
– You are aiming for a good credit score, so while trying to achieve this, don’t apply for any new credit. If you apply for new credit, it will be recorded and impact the score negatively by lowering it.
– Where possible, pay in full. If you end up just paying the minimum on your credit card, the interest compounds, and you will be paying it off for years.
– Never miss a credit card payment, as it will be documented on your credit report for seven years.
– If you have debts, like a car and credit card loan, work at paying them down. Try to get a bit of extra work—that does wonders in eliminating debt.
– If you are rate shopping (as in checking out different lenders for mortgage pre-approval on a home loan), do it quickly, within a week if possible. There is a 30-day period during which credit inquiries won’t affect your credit score.
– Try to save money as a fiscal emergency fund, even if it is only $1,000. That way, if you have any financial “melt-downs,” you will be able to fix them.
Getting a Good Credit Score Through Controlled Spending
If you have to pay rent and loans plus living expenses, spending can easily get out of hand. When you feel financially overwhelmed and are worried about your credit rating, there are free financial counselors available to talk you through putting a strategy in place and repaying debt.
If you are in difficulties, the financial counselor will also negotiate with your creditors on your behalf. The other thing you can do is to go and see the bank about a consolidation loan. By rolling all your debts into one loan, you will pay them off quickly.
When you have the option of going back to live with mom and dad, that can be worth doing for a year. Ask for free rent in return for gardening, mowing duties and other tasks they are looking to complete. Doing so could allow you to pay off your debts or save for the earnest money deposit for your own home.
Make a plan so that you won’t stay for more than one year, as you might find it overbearing at some point.
Consider a Free Service Like Credit Karma
Have you heard of Credit Karma? Maybe you have seen one of their advertisements on television. What credit Karma does is simple: they provide free advice for you to make the right credit decisions. So if you wonder how a credit decision on your part will impact your credit score, Credit Karma will provide that information.
When you don’t need a full-blown credit repair service, but instead on-going tips to keep your credit score improving, Credit Karma is worth exploring.
Keep Track of Your Credit Commitments to Keep an Excellent Credit Score
When you move from house to house, it is important to let all lenders know your new address. You can pick up the address change forms at the post office or do it online. It is easy to miss an important piece of mail when your address is not forwarded properly.
By not getting a credit card bill or an important document from the IRS, you could set yourself backward. All that hard work you have been putting in could be damaged. Keep this in mind when moving.
Keeping control of your debts is vital. If you have an overdue debt, it will be listed on your credit report for up to seven year. Once it is paid in full, however, it will be listed on your credit report showing that you have made the payment. It may improve your score once that happens. After seven years, debts can be removed from your credit report. Open some positive accounts to get better entries on your report.
How to Maintain and Increase Your Credit Score
– Ask to see your credit file to see what requires addressing.
– By law, you are entitled to a free credit report every 12 months or within 90 days of having a credit rejection.
– There could be an error in your file, stopping you from progressing with borrowing your home loan, so it is important to check it.
– If you have never had any debt, you can’t prove that you are creditworthy, so apply for a credit card.
– Use a variety of credit types: for example, car loan, credit card, etc.
– Lenders want evidence of stability when they are looking to give you a home loan.
Stay in the same job for two or three years to show continuity of employment and do not move to another job until you have secured the home loan.
Maintaining a Good Credit Score is Easy When You Put in The Effort
It is a good idea to set some goals about where you want to be in three years so you will have something to work toward.
If you have a good credit score, you will nearly always qualify for the best interest rates and lower finance charges on credit card balances. The less you are paying in bank interest, the quicker debt will be paid off.
Working to control credit and keep a good credit score helps ensure that you qualify for credit when you need it. Over the last 30 years, society has become increasingly reliant on credit. A good credit score is used for more than just getting a credit card or a car loan.
Final Thoughts About Credit Scores
Your credit score demonstrates your history of paying back your debts. Business insists you have a good credit score before providing you with products purchased on credit. This means that achieving and maintaining a good credit score is much more important than it once was. Whether we like it or not, our credit score is with us for life.
Hopefully you have found this guide to improving and maintaining a healthy credit score to be useful.
Bill Gassett is a nationally recognized real estate leader who has been helping people buy and sell MetroWest Massachusetts real estate for the past 33 years. He has been one of the top RE/MAX REALTORS® in New England for the past decade. In 2018, he was the No. 1 RE/MAX real estate agent in Massachusetts.