A credit score is determined by many different factors. If a person tries to understand every little thing there is to know about credit, they may become overwhelmed. At the same time, if a person does not make an effort to understand the basics about how credit scores work, they could find themselves buried in credit card debt. The most important things to know about a credit score is how to improve it or keep it from going south. Here are a few things everyone should know to improve their credit scores.
Cut Them Up
Credit cards can be a very useful tool in raising a credit score. However, if a person carries too many active credit cards, they can be doing their credit score harm. Lenders and credit card companies view ownership of many credit cards as a risk. The way they look at it is if a person has many credit cards then they assume that person has many opportunities to get buried in credit card debt. It’s ok to carry a couple, but once the wallet is holding five or more, it is a good idea to start cutting those cards.
Pay On Time
One of the worst things a person can do to their credit is to miss payments. For every month a person misses, their credit score is flagged. The more flags, the lower the score. While missing payments will lower a credit score, making payments on time will raise a credit score. Making payments on time over the course of a year or so will make significant improvements to a credit score. Also, if a payment is missed, a person will want to pay off that credit card as soon as possible and close the account. After a certain time period, the negative marks on the credit score will drop off.
Don’t Run the Credit Score
When a person needs to find out their credit score, it is ok to look it up online. There are a few sites where a person can run their credit report for free a few times each year. However, getting the actual credit score will cost a few bucks. Also, if a person were to run their credit many times in a given year, this would be detrimental to their credit score. This applies when a person goes to get a loan for a house or car, if they place a loan application, it is likely that their credit score will be run multiple times. Because of this, it is not a good idea to apply for loans at many different lenders. Instead, a person should shop around and find the best loan product for them, and then run their credit. This will diminish the number of times their credit scores are run and ultimately protect their credit score.
Don’t Max Out the Card
Another way a person can improve their credit score is to never max out their credit cards. The best thing to do is never use more than a quarter of the credit available on a given card. That would mean never spending more than five hundred dollars on a card with a two thousand dollar limit.
Maintaining a high credit score is ideal for securing the best interest rates on student loans, mortgage loans, and car loans. Improving a credit score requires discipline, but with a little restraint and consistently paying on time a person will be on their way to improving their credit score.
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