Finances are an important and sometimes frustrating part of every person’s life. Keeping an eye on bank account balances, balancing monetary needs and wants, and watching debt to income ratios causes headaches for even the most financially savvy. Maintaining a healthy credit score can also be quite a challenge at times. Fortunately, you can more easily manage your score by keeping track of the following five influential factors.
1. Knowledge
Staying on top of your credit score, knowing your number, and being aware of what things affect it can greatly aid you in efficiently managing it. You can get your free credit score from Credit Sesame quickly and easily every month. Free credit reports also usually show you all the recent and historical events that have had an impact on your score. Armed with this knowledge, you can better cope with future events and respond when your score changes. Credit report services usually offer credit building and improving options tailored specifically to you too, such as good credit cards and personal loans you can apply for. You can also find and dispute mistakes as well as increase your chances of catching any identity theft or fraud by regularly checking your score.
2. Inquiries
Checking your score will not negatively impact your score like a hard credit pull will. Your report will identify any hard inquiries that you have had though. Each time a potential lender runs a hard credit check it will temporarily reduce your score by a few points. Each lender should inform you if and when they conduct a hard pull so you have advanced notice that your score might decrease slightly. If you routinely look at your report and notice unauthorized hard inquiries, you might be able to dispute them and remove them from your credit record, thereby increasing your score back to where it should be.
3. Accounts
The total number and type of accounts you have also impact your score. Generally, you will have a better score if you have less total debt overall and if you keep a variety of account types. You should do your best to maintain both revolving and fixed loans. Revolving accounts include credit cards or personal lines of credit that do not have fixed terms, balances, or payments. Fixed loans, also called installment credit, are loans that have a finite number of payments and a proposed end to them, such as mortgages and auto loans.
4. Usage
The amount of credit you have used versus the amount of credit you have available is another factor that greatly affects your score value. This is also known as your credit utilization ratio. Your percentage of debt should be relatively low in comparison to your available credit to maintain a higher credit score. This does not mean a $0 balance is good though. It often helps to maintain a small balance and a higher limit on a card than no balance at all. You should also refrain from closing accounts when you pay them off to keep your credit available higher.
5. History
There are two components within history that matter for your credit score; your payment history and your credit longevity. Making your payments consistently on time positively impacts your score. Late payments and collections activity along with other derogatory marks on your credit, can seriously and rapidly derail a good score. The longer you have successfully maintained good credit the better as well. A healthy, lengthy history helps continue a higher score trend and increases your approval odds and borrowing capabilities.
Understanding and following these five credit-affecting factors can help you survive and thrive when it comes to your credit score. Paying attention to your score, inquiries, accounts, usage, and history makes maintaining a better score a more feasible task. Ultimately, it is best to catch up on your score before your debt catches up to you.