Every smart American consumer should know the answers to two questions: “What lowers your credit score?” and “Where does a good credit score start?” That’s why we’ve posted Arthur State blog articles on these important topics. But if you’re behind on your reading, remember that irresponsible spending and over-extending your lines of credit will nearly always lower your credit score, and to maintain a good score, which starts around 700, you’ll need to keep your finances in check.
With Get Smart About Credit Day coming up soon, we thought now was an appropriate time to provide even more helpful info on ways to build and maintain good credit. So, to support this worthy cause, here are five tips that can help you use your credit more wisely — and more successfully maintain a good credit score:
1. Know what lowers and raises your credit score
For any American consumer, having a good credit score can provide a long list of financial benefits. Just a few examples of these include easier loan approval, lower interest rates, better insurance rates and waived security deposit fees. And by understanding what financial factors affect your credit score — including top contributors like your payment history, credit utilization rate, length of credit usage, credit mix and number of recent “hard inquiries” on your credit — you can take greater control of and boost your credit score. (For more information on the factors that make the biggest impact on your credit score, check out our blog article titled “5 Top Things That Influence Your Credit Score.”)
2. Routinely view your credit reports
Reviewing your credit report, and comparing it to where financial experts say a good credit score starts, can help you understand if you’re in a good position or if your score needs more work. The Fair Credit Reporting Act requires that each of the United States’ three major, nationwide credit-reporting agencies — Equifax, Experian and TransUnion — provide consumers with a free copy of their credit report annually. And you can actually view these reports more frequently (and at no charge) by visiting annualcreditreport.com up to once per week and making a free request. Once you’ve received a copy of your credit report, you can check over it for accuracy, and then dispute any errors you might discover. And when you identify and correct errors that are lowering your credit score, your credit report will improve.
3. Avoid developing a dependence on your credit card
When used safely and wisely, credit cards serve as great financial tools for your household. They offer a long list of benefits such as convenience, purchasing power, protection against fraud, rewards points, loyalty programs, and more. You can even start building a good credit score using a credit card. But it’s important to avoid using credit cards to supplement any missing income, and you should never become financially dependent on the lines of credit they provide. When this becomes a habit, it leads to serious financial troubles and substantial debt that can lower your credit score, which is a headache that can become hard to escape.
4. Keep your balances in check
A good credit score starts with wise and responsible credit card use. This often requires paying off your full balances at the end of each billing period — or at least paying (hopefully substantially) more than the minimum required payment each billing cycle. To do this, make sure that the credit card balances you accrue don’t exceed the amount you can afford to pay off or pay down substantially each billing period. (And if you can’t pay off your entire balance each cycle, make sure you have a plan in place to pay down your credit card debt.) Your credit score can drop when you aren’t able to pay off your credit cards enough to keep the balances below the maximum.
5. When needed, work with your creditors
Life is full of setbacks that can impact us financially, and most of us experience them from time to time. If you ever find yourself in a position where you’re having trouble maintaining your credit card payments, reach out to your lender as soon as possible—before you start seeing this lower your credit score. Many creditors are willing to work with their customers to make alternative payment arrangements, especially if the credit card holder clearly explains his or her predicament and proposes potential solutions for repaying the debt. When talking through any potential agreements, be sure to ask questions if you need more explanation about any of the details. And once an agreement is reached, ask to be provided with a copy of the new terms in writing.
Need someone to answer your banking questions? Arthur State Bank is Here to Help
Proudly serving South Carolina since 1933, Arthur State Bank offers accounts and services to meet a variety of financial needs. To help you achieve all your financial goals, the bank offers in-person service as well as a range of convenient digital solutions. To learn how Arthur State Bank can help you with banking needs ranging from checking and savings to retirement accounts, mortgages, other personal loans, and more, visit arthurstatebank.com.
