If you will ever need a loan for a house, a car, education, or want to apply for a credit card, then you have to care about your credit rating. This credit score is a number used to determine a person’s ability to take on and pay off debt. This creditworthiness is determined by a number of factors, many of which can be controlled by the borrower. Let’s take a look at some of these factors and how to keep them in good standing.
Check your credit report regularly
Your credit report lists all the activity reported by lenders on your account activity. They let the credit agencies know the total credit available to the borrower, how much of the available credit they have used, and if bill are being paid on time. You can receive a copy of your report from AnnualCreditReport.com from each of the three credit reporting agencies for free every 12 months. It is imperative you check your report carefully to ensure there aren’t any errors. Sometimes the lender can make a mistake in what they report or you could be a victim of identity theft. The latest FTC study found that one in five Americans had some sort of error on their credit report. An error on a credit report could be responsible for a low credit score, resulting in higher interest rates and overall payments on loans.
Use a credit card regularly and pay it off on time every month
Lenders want to see your ability to handle debt, so having a healthy and lengthy credit history is a good thing. If you have multiple credit cards or other revolving debt, the utilization should be below 30% overall. That means, if all your cards have a total limit of $1,000, make sure you’re using no more than $300. Also, be sure to pay off your credit card bill, and all your other bills, on time every month. Your on-time payments show your reliability as a borrower.
Do not open multiple new credit accounts at once
Applying for multiple credit cards accounts at once may negatively affect your credit score. Each inquiry will stay on your report for two years and may appear to be a sign financial desperation. Opening multiple new accounts will also lower your score because it will shorten your average account age. It is safest to apply for credit only as needed and when you are sure you can afford it.
Have a variety of credit types
As you are able, try to get a mix of credit cards, retail store cards, car loans, and, eventually, a mortgage in your credit history. Lenders look favorably on your ability to handle multiple types of finances. It displays your financial maturity and acumen in different situations.
Show your staying power
Creditors believe constancy on your job or with your residency exhibit stability in your financial character. Along with owning a home (or a long stay in a rental) and tenure at your current employer, they are also interested in whether or not you have maintained a checking and savings account.
Whether you are just starting out, building a credit history, or repairing past mistakes, you can show your creditworthiness by exhibiting and maintaining financially healthy behavior. Most important is taking responsibility for your finances, making sure you are handling the perception of your financial character, and not letting things slip through the proverbial cracks. By doing things like automating your credit card bill payments and checking your credit report religiously, you can maintain a positive credit rating.
If you are looking for the right credit card to help you establish your creditworthiness, find your credit card here.
