4 Ways to keep your credit score high…and save some money in the process
- Keep your balances low
- Pay bills on time
- Keep accounts open
- Check your credit report
Just by doing these four simple things you can make sure your credit score goes up and stays high. When you have a high credit score you will be able to save money on finance charges because the higher your credit score the lower the rates that lenders will offer you, in general.
Keep your balances low. This item speaks for itself. Creditors would rather see low balances spread out over a number of areas than to see a few areas with very high balances close to the credit limit. In simpler language, it is better to have your $5000 of debt spread over 6 different cards than to have 2 cards maxed out with the $5000. When you have a low usage to limit ratio creditors perceive you as a better credit risk than someone who has a high ratio.
Now it may not always be possible or practical to spread your debt out but if you can do it then go ahead. If you can take advantage of low balance transfer offers do them but be mindful of the amounts you put on the card you are doing the transfers to. You need to weigh the benefits of having a card maxed out at 0% against the dip that your credit score will take for having a maxed out score.
Pay bills on time. Another .simple step. Companies watch to see if you are making late payments because this can end up being to the benefit of the creditors. Credit card companies especially love when this happens because it means they can
jack up raise your interest rates to the highest possible rate. This makes the credit card company more money and it certainly does not help you to save any money at all.
The easiest way to make sure all your bills get paid on time is to set up an automatic bill pay system for each bill. A really simple way to to do this is to use the free automatic bill pay system available from most banks. I love the one from Electric Orange because it is not only a free bill pay system but it is also a checking account that earns you interest. How great is that? Now your money works twice as hard for you so you can save money at the same time as you maintain your good credit.
Keep accounts open. Now this is one area that I must admit I have not kept up to date. Before I started this blog and learned about my credit score I just went ahead and closed off the accounts I was not using. I just thought that it be a lot easier to keep track of all my cards if I closed off the inactive ones. When I got my first credit report and saw that open accounts contribute to a high score even if they are not being used I got upset. I realized that I had closed off a credit card account that had a $4000 limit simply because I was not using the card. This high limit (my highest) would have helped my credit score immensely if I had just kept the card open.
I also regret closing some of the department store cards I got a few years ago like my Victoria’s Secret card. I opened the card to get the discount one day and then decided that I was not using the card any more so I closed it. If I had kept the card open I would have the benefit of having a card with a low utilization ratio …plus I would also get the fabulous offers from Victoria’s Secret during the year. I just did a what if scenario with a credit monitoring service and it showed that my credit score dropped an average of 4 points for each card you close.
Check your credit reports. I am still learning the value of doing this all the time. I am getting my free credit reports from www.annualcreditreport.com every four months in order to take advantage of the free service. I am also enrolled in a program right now that monitors your daily action and gives you all three credit scores. It is free for the first thirty days and then it runs $9.95 per month, which is a lot cheaper than many other places. I found this service through one of my credit cards and I just decide to give it a try.
It is so very important to have some idea of what is on your credit report even though you may not want to know your actual credit score. I thought the issue about my ‘late’ payment had already been resolved but if I had waited to check my credit report later then that would have gone unnoticed until then. I was also quite relieved to know what my actual credit score is because now I know how much harder I have to work in order to build it back up. This is just even more incentive for me to save as much money as I can so that I can put it towards paying off my debt.