Whether you know it or not, your first impression to a potential lender is your credit score, which can not only decide your approval fate, but also, if approved, what your rate and terms are. For many, credit score is not something that is often thought about, unless you fill out an application and then have to answer to your credit report. By staying on top of not only your credit score, but your credit report as well, you can actually save money in the long run by securing better interest rates and paying less in interest every month. Think about a mortgage of $300,000 at 5% paying around $1,610 approved with a lower credit score, while at 4% paying $1,432 at the best available rate with a high credit score, a difference of $178 every month. That added up over the course of a year is over $2,100, while over the entire thirty-year mortgage, over $64,000! That alone should be the reason to keep your score as high as it can, since you have to borrow anyways, might as well take advantage of the best interest rates on the market.
Keep Your Eye Out
We hear about so much fraud these days, whether it’s someone taking a peek at your card at the gas pump or leaving it out too long when paying a bar tab, you just never who could have your information at their disposal. Even retailers aren’t safe anymore, as hackers will get in and have customer’s information breached, opening up for potentially getting social security numbers and account information to use against you by opening up new accounts. Since the credit bureaus offer a free copy of your credit report to view once a year, it’s a good idea to pull every year and look through to make sure that every account and information is accurate. Beyond that though, in order to view your score, you can take a look on your credit card statements, as it will be listed, so you can see month over month to make sure your score is trending in the right direction, and if you see a dip, you can begin to investigate. Just keep in mind that it can take a month or two for the score or report to update, if you think there is information/payments missing.
Avoid Carrying Over a Balance
This is where credit card debt can be easy to fall into. Sure, you can charge all you want throughout the month with virtually no stopping you, but it’s when the bill comes is when you have to figure out how to pay it off, after the shock has wore off. By carrying over a balance to next month and the following months, you begin to be charged interest, which depending on the balance, can add up quickly with the typically high APR% on credit cards. It’s not bad to charge throughout the month, especially when it comes to the rewards that can add up by making the purchases that you would normally be making anyways, but if you’re unable to payoff the balance, it’s just asking for a path down the quicksand of debt.
Leave Accounts Open
If you have had a history of credit card debt problems, it may be the best feeling in the world to finally have that balance paid off, so much that your first reaction will be to close the account so you never travel down that road again, but that can actually hurt your credit score. Since your credit utilization is such a high factor in determining your credit score, closing an account will take away all of that available credit, and if you have balances on other cards, your utilization now goes up and your score goes down. If you can keep your account open but even cut up the card so you don’t use, that zero balance and available credit will help your score over time.
Don’t forget to Pay On-Time
Sure, even missing a day will not hurt your credit score, but it will cost you a late fee or even a spike in interest rate, but it’s when you get past a month late is when it shows up on your credit report and can even stay there for just under a decade at seven years, whether it was a mistake or not. If you are having trouble trying to keep track of all of your payments, you can always schedule in advance on the due date so you at least have a backup if you forget to schedule around your paychecks.