For better or worse one’s credit score has become increasingly important across a wide range of activities. Gone are the days when a bad credit score was a problem only if you wanted to take out a loan. Today everyone from prospective employers, rental agencies and security firms are looking at people’s credit scores to make determinations about what sort of person you are, even on matters not at all related to lending money. So how can you keep your credit score from being downgraded? Obviously you should pay your bills on time, but here are four less obvious tips for protecting your credit score:
Never Go Beyond Thirty Days
Despite your best efforts you may find that you simply cannot pay a certain bill on time. If so, do everything in your power to not let thirty days go by without turning in your late payment. About a third of your credit score is determined by how many debts you have that are over thirty days overdue. So to minimize the damage to your credit score of a late bill, make it a priority not to let it go more than thirty days overdue.
Keep Your Dead Cards
Commonsense might suggest that if you rarely or never use a credit card that the sensible thing to do would be to call and cancel the card. However the longer you hold a card the more it becomes embedded in your credit history. Therefore it looks bad to the credit agencies if you suddenly discontinue an old relationship because the length of your credit history is one of the things they consider. Also your debt to credit ratio is determined based on how many cards you have, making a dead card actually an asset by spreading your debt across a larger number of cards.
Use Your Cards
One might assume that if you always paid cash and never took on debt that the credit rating agencies would approve. Yet no credit is almost the same as bad credit to lenders since it leaves them with nothing with which to evaluate how you handle a purchase such as a house which cannot be bought with cash. Therefore a wise policy is to occasionally use your credit card when you don’t really have to, just so there is an official record of how well you pay off your debts.
Stagger Your Applications
When applying for credit it may seem convenient to simply apply for a bunch of credit cards all at once and then pick which offers to accept. However credit agencies are alarmed by this behavior, interpreting it as a sign that you are in the midst of some financial crisis and desperately trying to acquire more credit. A smarter way to acquire credit is one card at a time with a little space between applying for each one.
By avoiding these common mistakes you can escape any unnecessary marks against your credit score and thereby enjoy better financial health.