All You Need To Know To Maintain A Good Credit Score

Maintaining as well as building a good credit score is essential for various reasons. It helps to keep your debt in check and measure your prospects of taking up new credit. It also helps in bettering the chances of availing loans at affordable rates. 

Your credit score is dependent on factors like the length of your credit history, payment history, credit usage, credit mix, and new credit. Your credit score can increase or decrease in many ways. Here, we will advise you on how to maintain a good credit score. 

Top 9 Ways to Maintain a Good Credit Score 

As mentioned earlier, maintaining a good credit score is essential as it has many benefits. You can get loans at lower interest rates, higher credit limits, and more offers. It becomes easier to avail of new credit and loans as well.

Go through the sections below to learn various ways of maintaining a good credit score. 

Pay Your Bills on Time 

To begin with, paying bills on time accounts for a substantial part of your credit score. Make sure that you pay not only your credit card bills but also all other types of bills. For the most part, only a few types of bills affect your credit score.

 

However, they can be accounted for when you are unable to pay them on time. You can use financial apps to stay ahead of your bill payments or set up auto payments for the same. 

Utilize Only a Fraction of Available Credit 

Using a credit card is excellent, but do not forget to stick to only what you can afford. Maxing out your cards is never a good thing to do. It creates a huge dent in your credit score as it accounts for a big chunk of the credit report.

Therefore, it is advised only to use up to 25-30% of your credit limit. For instance – if you have a credit limit of £1000 and you’re utilizing £500, then you’re using 50% of your credit limit. Hence, you would have to stick to spending between £250-300 to help maintain a good credit score. 

Do Not Close Old Credit Cards 

The length of your credit history accounts for a lot of your credit score. Oftentimes, people make the mistake of closing credit card accounts that they may not use. However, this is a missed opportunity to contribute towards a better credit score. The longer your credit card stays on file, the better your credit score will be.

In another instance, they can reduce your available credit as well. For example – If your credit limit of the old credit card is £1000 and your overall credit limit is £10000, then your effective credit limit becomes £9000 after you close that card. 

Maintaining a Good Credit Mix 

Credit mix refers to the various credits you have. This includes loans, mortgages, credit cards, finance company accounts, and retail accounts. They have a big impact on your credit score.

However, it is essential to remember that you should borrow only what you can afford. Even though maintaining a credit mix is beneficial, it is unnecessary if you cannot afford it. Also, unnecessarily taking up credit can harm your credit score. 

Avoid Taking New Credit 

In continuance to the previous point, taking new credit constitutes a big part of your credit score. Each time you take a new credit, a hard inquiry is made in your credit report. This creates a substantial impact on whether you have a good score or not. Hence, apply for new credit only when necessary.

Make sure you take new credit from trusted lenders like CreditSpring, among a few select others. 

Manage Existing Debt 

As mentioned earlier, your credit score depends on your existing credit mix. Accordingly, you must maintain your debts as well. Try to prioritize higher interest accounts when paying your bills. Keep a note or a reminder of all the monthly payments you have to do overtime.

Existing balances on your credit card can lower your score if you forget to pay them on time. If you fall behind on your payments, contact your creditors right away. They will help to provide an affordable payment solution. You can also get bad credit payday loans to pay off standing debts. 

Try to Make Payments in Full 

Never miss out on your monthly payments as it can affect your credit score. Also, do not pay the minimum amount on your card. Doing so can stretch your debts and even accumulate interest over time. Hence, always try to pay the full amount of your cards on time.

You should pay the minimum amount only if you are unable to do so for specific months. As an alternative, you can transfer all your existing credit card balance to one card and pay it off in one go. This will help prevent missing out on other payments as well. 

Check Credit Report Frequently 

As a common myth, people say that checking your credit report can bring down your credit score. However, it is the entire opposite. Only a hard inquiry into your credit report can affect your score. This is done only when you apply for new credit. Checking your credit report helps identify errors early on.

There are three central credit scoring agencies in the UK: Equifax, Experian, and TransUnion. As a resident of the UK, you can avail free credit reports throughout the year. Going over your credit reports can also help identify theft and credit card fraud. 

Use Financial Apps or Services 

Currently, there are many financial apps available on the App Store for various purposes. Some help to plan a budget, others help to manage your income, and some help to remind you about your payments.

Although some of them are free, most of the others require a monthly fee or an annual subscription. You can also find apps to monitor your credit report in real-time. This will help to keep track of common errors and identify credit frauds being done in your name. 

Conclusion 

To summarize, maintaining a good credit score is crucial to get financial offers. You can do this by paying your bills on time, spending within your limits, checking your credit report for mistakes, and managing your debt.

As an added help, you can use financial apps to keep track of your monthly payments, manage your debts, and make a monthly expenditure budget.