Your ability to get a car loan, a personal loan or even mortgage when the need arises highly relies on your credit rating. When you are in need of making those large purchases, a good credit or even a perfect credit rating makes the process more affordable for you when you need to borrow the money.
For an excellent credit rating, there is a list of habits that consumers have developed to allow them build and maintain the said credit rating.
1. Maxing out is a No!
Maxing out a credit card with things that you cannot afford is one of the most common mistakes that most people make when it comes to their credit cards. Living within your means even with a credit card is the secret to making it work for you. What this means is that you can only buy things with your credit card if you have cash at hand for them. Paying balances in full and keeping low balances is a trait that people with excellent credit have adopted and because of this, they rarely ever pay penalties or interests which means that they save even more.
Tip! While cultivating financial discipline and building credit, you can pay for your credit card bills online as soon as you get home. This way, you never miss payments and you also get to earn rewards if you have a rewards card.
2. Keep utilization in check.
One of the integral parts that make up a credit score is credit utilization. This refers to a percentage of used credit divided by the available credit. To have an excellent credit rating, you must keep the score at or under 30% this is another habit that people with good credit have built.
3. Do not miss payments.
Another factor that can affect your credit rating rating in a major way is your ability to pay your credit bill on time. Being able to pay your bill on time even if it is the minimum that you afford to pay at the time is very critical. Paying often and early is a good way to ensure that you never miss your payment.
Tip! There is no restriction as to how many times you can pay your credit card bill. Therefore, you can make a couple of payments in a single period. For instance, you can pat in two installments in a month which would help you to squeeze down your debt.
4. Carrying should not be paid for.
It is annoying and more serious throwing money away if you have to pay an annual fee to carry a credit card. Instead, forage around for credit cards that have rewards and do not have the annual carrying fee. It should be easy to find these because most of the best and those that have most benefits don’t attract the annual carrying fee. However, if your card features benefits like Premium concierge service then carrying that card is sensible.
It is also a good idea to make sure that while you are shopping for a new card, you opt for those that will usually have the fees for the first year waived. On the second year, you can assess if the annual fee and the benefits offered by the card are worth paying.
Another way that you can use to save in a big way is the avoidable interest charges. How much credit and interest you pay is primarily within your control. If you are able to pay your balances entirely within the grace period, then you never have to incur the cost of interest. Also, by paying your account in full for two consecutive months, you can regain your interest free payments.
There is a range of interest that you can be charged with most credit cards. For instance, 12.99% – 22.99%. If you are responsible with your account but are charged the highest percentage, you can negotiate it down to something that you are more comfortable with. If the company declines, you can take your business elsewhere.
Tip! When shopping around, look for a service that will offer you a 0% interest for the first 12 months. After the period elapses, you can either cancel the card or transfer your Balance to another card with an intro APR that is 0%.
5. Have a couple of different lines of credit.
Having a couple of reliable lines of credit like auto and personal loans, mortgage and credit cards is a trend that lenders like seeing.
The reasoning behind this is that it signifies that different lenders trust you with their loans big or small. Another reason is related to your credit utilization. If you have more credit, then you will definitely have more use for the money that is if you do not misuse the funds.
6. Monitor your credit.
It is always good to keep a close eye on your credit rating report. It is imperative for all to keep an eye on their credit more so given the data breaches, fraudulent activity and identity theft. From all the three credit bureaus, one can access their report for credit once per annum. However, you can do it more than once as then you are able to spot and iron out any problems and it is a great feeling to see the reward of your hard work.
Tip! You should not have to pay to see your credit score or even share sensitive credit card information with unofficial sites. Ensure you only access your credit and credit rating from safe and trustworthy sources.
When it comes to credit, remember that time is able to heal all the wounds. Even though some negative marks could dent your score for up to seven years, remember that the more recent ones are more implicating than the old hence there is no need to give up.