Time to Read – 2 Minutes
Maintaining a good credit score is essential for financial health. It can determine your ability to qualify for loans, get favorable interest rates, and even rent an apartment or secure a job. Here are the essential habits that can help you maintain a strong credit score over time.
1. Pay Your Bills on Time
Your payment history is the single most important factor in your credit score, accounting for 35% of the total score. Late payments can have a significant negative impact, so make it a priority to pay all your bills—credit cards, utilities, loans—on or before their due date. Set up automatic payments or use reminders to stay on track.
2. Keep Your Credit Utilization Low
Credit utilization, or how much of your available credit you’re using, accounts for 30% of your score. Ideally, you should aim to use less than 30% of your available credit. For example, if your credit limit is $10,000, try to keep your balance below $3,000. High credit utilization signals financial stress and can hurt your score.
3. Avoid Closing Old Credit Accounts
The length of your credit history accounts for 15% of your score. Closing old accounts can shorten the average age of your credit, which could negatively affect your score. Instead, keep those old accounts open, even if you’re not using them actively, as they contribute to a longer credit history.
4. Limit New Credit Applications
Every time you apply for new credit, a hard inquiry is placed on your credit report, which can temporarily lower your score. Avoid applying for new credit unless absolutely necessary, especially if you plan to apply for a major loan like a mortgage soon.
5. Diversify Your Credit Mix
Having a mix of different types of credit—credit cards, installment loans, mortgages—can positively impact your score. Lenders like to see that you can manage different types of credit responsibly. However, don’t take on new debt just to diversify your mix if it’s not financially necessary.
6. Regularly Monitor Your Credit Report
Keeping an eye on your credit report is crucial to ensuring there are no errors or signs of fraud. You’re entitled to one free credit report per year from each of the major credit bureaus, so take advantage of this and check for any discrepancies that could be hurting your score. By following these habits, you can maintain a strong credit score that will benefit you for years to come, opening doors to better financial opportunities.
