Your credit score is essentially your passport to financial opportunities. With a possible range of 300 to 900, your score tells lenders what kind of a risk you are likely to be as a borrower. A low credit score can prevent you from getting the lowest mortgage rate, or even from getting a mortgage at all. But here’s the thing, this important factor in your mortgage negotiation is entirely within your control. That’s why it’s important to know the key credit behaviors that can boost your score or keep it high:
1.Pay bills on time. The single biggest factor in your credit score is having a timely bill payment history. Never let a bill get past due. That one habit is your single biggest game-changer. Set up automatic payments if that will help.
2.Know your limits. Your credit score is based on your balances relative to your available credit. Look at your credit limits and try not to use more than 30% of the available amount. If your limit is $10,000, try to not let your balance go higher than $3,000.
3.Avoid collections. Don’t ever let any bill go to Collections, even if it’s for a small or disputed amount. These black marks on your credit are hard to erase. If it’s happened, be prepared to explain why, and be sure it’s paid in full and reported to Equifax.
4.Avoid store cards. When you’re asked – would you like to apply for our Store Card to save $X dollars on your purchase today – don’t do it; the high rate that goes with that card isn’t worth your savings on that particular purchase.
5.Build your credit history. Make sure you do have a credit history. You may have a low score because you do not have a record of owing money and paying it back. You can build a credit history by using a credit card.
6. Don’t cancel your card. Even if you’re not using your credit card very frequently, you shouldn’t cancel it. Canceling a credit card may actually lower your credit rating. Instead, keep the card in your dresser drawer, and use it once a year. The primary exception would be that you can cancel your card if it has a fee (as paying the fee may cost more than a ding to your credit score would).
Everyone should aspire to be a highly responsible credit card user. Besides obvious benefits such as staying out of debt, highly responsible credit card users will also be happier and less stressed out about their money because they’re in more control.