5 Credit Card Tips for Good Credit
There are many reasons why you want to make every effort to build a good credit history. Not only could having good credit allow you to be approved for loans at more competitive interest rates, but also your good credit could help you rent an apartment or lower your home and car insurance premiums. Specific to credit card tips for good credit, read on for more.
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What Goes Into Credit Scores?
Each credit scoring company has different formulas it uses to create credit scores, and they don’t disclose these formulas to the public. However, many of those companies consider similar factors to determine a credit score, such as paying on time, how many accounts a consumer has in their name, and how long a consumer has had credit.
Tips for Building and Maintaining Good Credit
Here are five credit card tips for good credit habits you can develop:
1. Use tools to pay your bills on-time.
Since your payment history is an important factor in your credit score, you should focus on avoiding late payments and making all of your payments on time each month. But rather than relying on your memory, you can often use the tools that your credit issuer offers. Most credit card issuers, including Discover, offer email and text reminders of your payment due dates. In addition, you may also be able to set up automatic payments from your bank account.
2. Keep your debt-to-credit ratio low.
After your payment history, another important factor in your credit score is your amounts owed. It is better to have a relatively low amount of debt compared to your available credit. This is called your debt-to-credit ratio, or credit utilization ratio. To maintain a low credit utilization ratio, keep your debt under control while maintaining enough available credit.
3. Don’t apply for many new lines of credit in a short period of time.
While you need sufficient lines of credit to maintain a low debt-to-credit ratio, it’s not typically a good idea to apply for many credit cards at once. Each application triggers a hard inquiry into your credit score, which can impact it, and may also appear to lenders as though you’re applying for too much credit.
4. Don’t continuously open and close accounts.
Since lenders want to do business with customers who have a stable credit history, your credit score could suffer if you are frequently opening and closing accounts. Instead, try keeping the accounts you have open and in good standing rather than closing them unnecessarily. Toward this end, it can be helpful up front to be thoughtful about what credit cards you want to carry, and which other loans you’d want to apply for.
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5. Don’t be afraid of credit.
Ultimately, a good credit history is dependent on creating a track record of responsibly managed accounts. Avoiding credit altogether may eliminate the possibility of debt, but you may not establish a credit history as easily either.