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How to properly manage your Credit score

Having a good credit score is crucial for one’s financial life. We cannot deny the extreme importance of having enough money to be able to survive in this materialistic world we live in. However, having “enough” money can be difficult to achieve especially if your income is just lower than the cost of your needs.

This is when you need to sign up for credit cards and other credit card companies to be able to obtain a loan that will help you get what you want without worrying about paying a large lump sum amount at once. However, obtaining credit also has its own set of requirements and one of these is to have a good credit score. A poor credit score will make it too difficult for you to get an apartment, a new car or even telephone service. So, how do you maintain a good credit score? How do you manage it well to ensure that you will have a good credit score all the time? Read further to find out.

Obtain credit reports every year.

One way to better manage your credit is to make sure that you check each of your credit reports every year. You can make this possible through the use of a free service that you can obtain from a request for your credit report once every four months. This will help you see errors that may come up on your credit report at different ties of the year. Doing this on a regular basis will also help you quickly spot identity theft. See to it that you tag this task as recurring on your calendar to avoid missing it every four months.

Check for errors on your credit report and have them corrected.

If after checking your credit report you found some inaccurate information which you think can hurt your credit score, have these corrected the soonest time you can. These errors may vary from mere mistakes when sending reports to creditors or a mistake could be due to a fraudulent credit. 

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Remember that you have the right to dispute these errors and request to have them corrected for no fee at all. This is because the reporting agencies and your credit card companies are the ones responsible for sending accurate information to them.

You may also decide to make use of a credit repair company to settle all these errors if the derogatory information shown on your credit history is way beyond what you can handle on your own. But, be careful about choosing the credit repair company to hire. Take the time to peruse the internet to check for credit repair reviews and see which company will most likely give you the best service when it comes to doing all the work or repairing your credit score. These professionals from credit repair companies will help you challenge errors that are present on your credit reports. They can also help you dispute negative items or negotiate on your behalf for a less negative credit report.

Do not cancel credit cards.

When it comes to managing your credit score, one of the best ways to do it is to limit the use of your credit cards as much as possible. However, you do not have to cancel your credit card account the moment you have paid it off completely. This is because your credit score also depends on the number of credit lines that you have remained open.

The length of time in which these credit lines are open also has an impact on your credit score. If it can be seen that your credit lines are in good standing, the more chances you will have of getting a good credit score. On the other hand, if you close your account as soon as you have paid it off chances are high that your credit utilization ratio will also increase.

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Oftentimes, lenders would prefer to see a record of credit management that has been maintained for a long period of time. If you do not cancel your credit cards but they remain open and in good standing, it will serve as proof that you have some restraint.

This is a good thing to do especially if the credit card company you choose is not costing you a significant amount of money for annual fees. However, you have to use your credit card at least once every year so that your account will not be closed. Do not forget to pay it off before it is due to still maintain a good credit record.

Watch out on your credit utilization ratio.

Another important thing to watch out for when managing your credit score is to see to it that you keep your credit utilization ratio low. To find out your credit utilization ratio, you may add all the balances on your credit card. Then, divide this amount with your total credit limit.

This would mean that if you charge about $3,000 every month from your credit card while your credit limit in all your cards is at $10,000, then your credit utilization ratio will most likely be at 30 percent. Note that lenders would prefer to see the credit utilization ratio of 30 percent or less. Generally, those who were found to have good credit scores also have a very low credit utilization ratio.

To check your average credit utilization ratio, examine all of your credit card statements from the previous 12 months. Add the balances that you have in a monthly period, in each of your credit cards and then divide this sum by 12. The answer will reveal the average credit you use every month.

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Having a low credit utilization ratio is one solid proof that you do not max out your credit cards which also means that you are good at managing your credits. In addition to paying off debt and keeping your outstanding credit card balances low, you may also positively impact your credit utilization ratio by being an authorized user of someone else’s account. However, make sure as well that the other person also maintains a good credit score.

Make it a habit to pay on time.

Late payments are a surefire way to damage your credit standing. This is true especially if your car payments, mortgages and other huge loans show you frequently have late payments. When it comes to earning a good credit score, it is extremely important that you pay your credit on time or ahead of its due date. This is when the need to make use of electronic bill-paying methods be carefully considered.

Paying your bills electronically will also help eliminate the tendency of forgetting your due date because it can also enable you to turn on notifications that will remind you days ahead of an incoming due date for a certain bill. Once you have learned the habit of paying your debts on time and managing your credit score well, soon you will also learn to save for retirement and add money to your emergency fund. Maintaining a good credit score not only needs money. It also warrants discipline and a good amount of self-restraint.