Cultivate these Good Credit Habits to Build Credit Score

Having a good credit history is imperative to having a good lifestyle - securing a loan for a house, renting an apartment, or simply being able to buy more expensive things you like. Your creditworthiness, typically calculated using the FICO score and tradelines, is used by credit bureaus and agencies to analyze your credit history, spending, and repayment behavior before they make lending decisions. Good credit habits can lead to good scores, and here are a few tips to help you build credit ( improvemycreditfitness.com/Build-Credit ) scores effectively.

● Always pay on time

Having a credit card or loan gives you the power to buy myriad things you love and yearn to possess. However, these aren’t sources of extra money that have had in a lottery or sweepstake. Rather, they are borrowed for a purpose and need to be returned at a specified point in time. Lapsed payments reflect negatively on your tradelines and impact your credit score in an adverse manner. So, remember to always pay off your bills, not just your credit cards, but also utility bills, or anything else that contributes to your tradeline, on or before the given date, lest it goes to a collection agency and interferes with your credit score.

● Keep the utilization on your cards low

Every credit card that is issued has an upper spending limit. Utilization refers to the percentage of this limit that you use. Credit cards typically have high spending limits, but that does not mean you should spend all the money available to you. Rather, in order to build a credit ( improvemycreditfitness.com/blog ) score and keep it on the higher side, it is best that you hold spending or card utilization at less than 50% of the actual allowed value.

● Refrain from opening multiple credit accounts together

It is common to be faced with a situation where you need a larger sum of money or want to buy something that you haven’t saved up for. Opening multiple credit accounts close to each other may seem like the practical way out, but be warned. Doing so can cause a temporary drop in your credit score, and when such applications are raised one after the other quickly, your score can get impacted significantly. Instead, space out your applications in such a manner that they are at least six months apart.

● Avoid closing credit accounts

There may be many reasons why you may no longer need a credit account - maybe you have upgraded to a new account, chosen a better service provider, and so on. Closing an account that doesn’t serve any purpose to your spending or financial goals may seem like a logical decision, but that is unfortunately not how it works with credit score calculators. Closing an account affects your credit utilization and brings down your average account age. The impact can be significant if you choose to shut down an account that has been operational for a long time.

Keep in mind these tips and rest assured, you will be able to build a good credit score in the long run.