Creating and maintaining a great credit score isn’t something that happens overnight; it takes intention and effort. Fortunately, maintaining a good credit score or pushing for better requires a collection of small steps and habits that won’t greatly disrupt your daily life.
Try these five helpful tips to maintain your good credit score and set yourself up for success.
Aways Make Your Minimum Payments
If you do nothing else, make sure you pay your minimum payments on credit cards and loans. Failure to make minimum payments is one of the biggest negative influencers on your credit score and something future creditors will look at before giving you a loan— especially when trying to get a mortgage.
Your minimum payment is an agreement that, at the very least, you will pay this much every month. If your minimum payments become too high to pay each month, it’s time to address the underlying issues and talk to a debt consolidator or financial advisor.
Monitor Your Credit Score and Report
If your goal is to maintain or improve a good credit score, you’ll want to become vigilant in monitoring your score and reviewing your report. There’s a common misconception that every time you look at your credit score or report, it will go down. You can pull your own report without impacting your score; it’s only impacted when a loan provider pulls it in what’s called a “hard inquiry.”
Reviewing your report will allow you to highlight any incorrect negative items impacting your score, such as an unapproved hard inquiry or collections information past the statute of limitations. If you notice these items, it’s worth using professional credit repair software to have them promptly removed.
Make Payments on Time
Another significant factor in your credit score is whether you make payments on time— including minimum payments. If you struggle to make payments on time due to inconsistent income (contractors and entrepreneurs often have this issue) or forgetting, create automated payments based on your schedule.
Set up an automatic transfer on days when you know the money will be in your account, breaking the payment into separate parts as needed to get ahead of schedule. For example, if you get paid bi-weekly and your car payment is due at the end of the month, use an automatic withdrawal to transfer half the payment on each payday.
Pay Down Existing Debts
While it may seem obvious, paying down your existing debts will help you improve your credit score. You don’t need to be debt-free to have good credit; making minimum payments on time contributes to that. However, increasing the gap between what you’re approved for and what you actually borrow will raise your credit score even higher.
Create a debt payment strategy— like the debt snowball or avalanche— to reduce your existing debt. Then, put a financial management strategy in place to help you avoid incurring future debts or contributing to the debts you have already.
Create an Emergency Fund
One of the first steps in improving your financial independence and getting out of the debt cycle is to build an emergency fund. Start with a goal of putting away $1000 in an account that isn’t accessible via your debit cards but could be accessed if needed for an emergency. In this case, an emergency could be an employment gap or an unexpected car repair. Then, replace the money over time.
Creating an emergency fund will prevent you from resorting to borrowing when you find yourself in need. Ideally, you’ll build this fund to keep you covered if you’re out of work for a month or more. If you get to a point where your emergency fund is equal to your debt, you may even use this to pay off your debt entirely!
With these simple tips, you can maintain a healthy credit score and even make gradual improvements. Use automation and sustainable habit building to guide you through the process.
