Countdown to 2016 and a Better Credit Score
Posted on 2015-12-23 12:03:19
Whether you’ve spent a year damaging your credit score with poor credit habits or let the holidays entice you into overspending, now is the time to work on a better credit score. A good credit score is rarely a coincidence. Credit scores are designed to reflect your credit history, that is, how you have used credit over time. It is usually those who conscientiously think about their credit habits who have the higher credit scores. Here are 4 credit habits to adopt now for a better credit score in 2016.
Always pay bills on time.
This is a “no exceptions” rule. On most credit score scales, your payment history accounts for about 35 percent of your credit score. Even a single late payment can cause a significant drop. The impact will likely be more serious for someone who already has a good credit score.
Keep account balances low.
In other words, avoid overspending. Most experts recommend keeping your account balances below 25% of your credit limit; some recommend as low as 10%. If your balances are consistently higher than that, consider locking up your credit cards for a time. Let those balances drop. If you are one who uses credit cards to earn rewards, make sure your statement closing balance falls below 25%. If necessary, pay down your balance before your statement closes.
What Is Your Credit Score Going Into 2016?
Think before closing an account.
If you find it a temptation to spend just because you have an available credit card, it might be time to close accounts. But remember that every time you close an inactive credit card account you risk shortening your credit history, and that is one of the factors used in calculating a credit score. The other way closing an account can affect your credit score is by lowering your overall available credit. That means whatever credit you use suddenly becomes a higher percentage of your available credit.
Get a hobby besides collecting credit cards.
Don’t apply for credit you don’t need. Those with the highest credit scores are actually those who use credit the least. Don’t impulsively open a credit account for a small savings on your purchase. It is rarely worth it.
A high credit score is a reward for responsible use of credit. The reward is well worth the effort. A high credit score will get you better terms on a loan that can affect the money in your wallet for years. That should be motivation to work hard and be responsible with your financial obligations. Make 2016 the year you take charge of your credit score.
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