Credit scores are on the rise in the United States. According to the Experian 2020 Consumer Credit Review, the average credit score rose to a record high of 710 this past year, which is a growth of seven points from 2019. Right now, 69% of Americans have a good credit score of 670 or above.
Truthfully, maintaining a good credit score will give you lots of personal finance leverage, including being offered the best interest rates when applying for new credit, insurance policies, and refinancing opportunities.
Read on for five simple tips for maintaining your credit score at a high level, and if you want to know where your credit file stands, you can use Credible to check your credit score without impacting it negatively.
How to keep your credit score high
1. Manage your debt
The first key to improving your credit history is to pay off debt. If you’re juggling multiple balances and payments right now, you may want to consider debt consolidation as a repayment strategy. Debt consolidation involves using a new loan to pay off all of your existing accounts and streamline them into one monthly payment Ideally, the new debt consolidation loan will also have a lower interest rate, which will save you money in the long run.
While it's also important to keep an eye on the number of new accounts and hard inquiries that show up on your credit report, if your outstanding balances are from credit card debt, taking out an installment loan in the form of a debt consolidation loan may actually help to improve your credit mix, which counts for 10% of your overall FICO score. Likewise, it may lower your credit utilization rate, which is 30% of your overall FICO credit score.
Visiting Credible can help you compare debt consolidation options to find the best personal loan rates for you, based on your credit score and credit history.
2. Make on-time payments
Next, after you have a handle on your debt, be sure to do your best to make all your payments on time. The major credit reporting agencies agree that payment history is one of the most important factors in determining a good credit score. For instance, payment history accounts for 35% of your overall FICO score and up to 40% of your TransUnion score.
With that in mind, if you want to avoid having a bad credit score, it's imperative that you make your payments on time every month. If you need help remembering to make your payments on time, you can always set reminders or set up automatic payments from your bank account.
Not sure where you fit on the credit score spectrum? Then you should start using a credit monitoring service to track changes to your credit score. Credible can get you set up with a free service today.
3. Keep old credit cards open
Many people think it's a good idea to close old credit card accounts that they no longer use. However, in reality, doing so can hurt your score. Length of credit history (or credit age) accounts for 21% of your TransUnion score and 15% of your FICO score. To that end, it's a good idea from a credit reporting standpoint to keep old credit cards open, even if you rarely use them.
If you do open a new credit card, keep in mind that it may require a hard inquiry, but the new line of credit could improve your credit utilization rate if you keep your balances low. Credible can help you compare and contrast multiple credit card types, so you can find the perfect fit.
4. Monitor your credit
Next, it's important to monitor your credit regularly for signs of identity theft, fraud or other negative information. Put simply, if your personal information falls into the wrong hands, it could spell disaster for your credit score. With that said, checking credit score and credit reports regularly for errors is important for your overall credit standing (you can do this for free today with Credible's credit monitoring partners).
If you do see that some information on your credit report is wrong, the first thing to do is to file a dispute. When you dispute a credit report, you write a letter to the credit reporting agency asking them to correct the information in question. Then, the credit reporting agency is given time to investigate the dispute and determine whether to make a change. In addition, if you suspect fraud, you can ask for a security freeze to be placed on your report, which prevents creditors from being able to access your report and others from being able to open accounts in your name
If you don't want the hassle of having to keep an eye on your report, you can always consider credit monitoring services. Credit monitoring services keep an eye on any hard or soft inquiries on your report and will inform you of any suspicious activity.
Check out some of Credible's partners here to sign up for free credit monitoring. You can get instant alerts on late payments, fraudulent activities, credit score changes and more.
5. Keep credit card balances low
Lastly, when your goal is to improve your score, it's important to keep your credit card balances as low as possible. Your credit utilization rate, which is the measure of the amount of credit you're using versus the total amount of credit available to you, accounts for 30% of your overall FICO score and 20% of your total TransUnion score.
The bottom line
Credit monitoring is one of the most powerful things you can do to improve your credit score. Credible can help you see where you stand without hurting your score.