Your credit history reflect all your financial movements – from the time you opened your very first credit card account up to the present times. This includes all transactions made using your credit card, all loans taken out, debts, if you have any, and debt repayment history. If you have all these factors periodically monitored and checked, then you won't have problems keeping a good credit score.
Maintaining positive credit is extremely important for a good number of things, including the ability to get lower interest rates on loans and credit cards. In the event that you decide to use a loan to purchase a house or a car, even a tiny percent difference in interest rate could mean thousands of dollars in savings! This is why positive credit is so important.
However, a lot of us still find ourselves in a financial rut because we are clueless of how to achieve and maintain good credit standing. Whether you are in the majority (those with blemished to damaged history) or in the minority (those with stellar profiles), the following tips will help keep your credit on track:
Pay your bills on time.
This is a hard and fast rule you should follow to keep yourself from accumulating additional fees and larger debts. Your payment record accounts for 35% of your overall credit score.
Spend according to what you can afford.
This is one of the dangers of having a credit card; you don't have infinite money to spend. This is the trap a lot of consumers get themselves into because consumers have the tendency to over indulge. To avoid falling into this trap, always remember to spend only within your means, and only within your credit limit.
Regularly review your credit report.
To understand your current credit standing, it is important that you are aware of what is being reported about you to the credit bureaus (Equifax, TransUnion, Experian, etc.). Every consumer is allowed one free credit report annually. Thoroughly review your report to spot inaccuracies, errors or miscalculations and dispute them promptly.
Use cash whenever possible; use credit for large purchases.
This tip is very important, especially for those who are extremely reliant on their credit cards. For small transactions, just use your cash. Forgo using your credit unless it is for larger and more important purchases – eg a car – that would be awkward with an exchange of large sums of cash.
Stay within your credit limit.
Completely avoid maxing out your credit cards! Stay within your credit limit by using just 30% – 50%, or even less, of the amount available. This means, if your card limit is $ 1000, you should limit yourself to spending just $ 300 to $ 500 at most.
These are just a few tips on how you can maintain a desirable credit score, but the true key to keeping yourself free from debts is self-discipline.
Being financially responsible means knowing when to spend, how much you should spend within a certain period of time, or knowing if you should spend at all. Being financially responsible will pay off in spades, and when the rainy days come, a positive credit history will help you get any loan you need.