Your financial status is based purely on habits—spending habits, work habits, and lifestyle expectations. Getting a handle on spending, paying bills on time, and limiting your lifestyle takes a long-term commitment and self-control. It may not always be easy, but the effort will pay off when you see your score improve.
Eight Tips for Managing Your Credit
- Pay your bills on time.
Paying your bills by the date they’re due is the best way to manage a positive credit file and build your credit ratings. Even if you’ve had serious delinquencies in the past, it is never too late to improve your credit. Your prior past due payments will be outweighed by new financial habits as long as you’re consistent.
- Keep your credit card balances low.
High outstanding balances on your credit cards can weigh down your score. If you can, work toward getting your balance at least under 50% of your total credit limit on each account.
- Check your credit report for accuracy.
Check your credit report periodically for inaccuracies. Pay close attention to payments you’ve made and cards you’ve closed or paid off. Look out for bills you’ve paid, that may still be showing up as discrepancies on your report.
- Pay off debt rather than move it around.
When it comes to the amount of debt you have, the most effective way to improve your score is simply by paying down the amount you owe. Unfortunately, consolidating your credit card balance onto one credit card, spreading it over multiple cards or rolling your balance over onto a new credit card every year doesn’t help to improve your score in the long run.
- Keep your credit cards, but manage them responsibly.
Keeping your credit cards can help improve your credit score, provided you manage them responsibly. It will not necessarily help your score to cancel cards or loan accounts immediately after paying them off. A higher average age for all of your accounts can help your score.
- Don’t open multiple accounts too quickly; especially if you have a short credit history.
Opening multiple credit accounts in a short period of time is considered a risk by reporting agencies. Why? Because you are potentially taking on a lot of debt. If you open three credit cards in one month and they each have a $10,000 available balance, you are allowing yourself the opportunity to gain $30,000 worth of debt instantly. New accounts will also lower the average age of your existing accounts, which can also lower your score.
- Don’t close an account to remove it from your record.
A closed account will still show up on your credit report and may still be factored into your score. Closing accounts could lower your score if they are positively contributing to your length of credit history.
- Contact your creditors or see a legitimate credit counselor if you are having financial difficulties.
Don’t hesitate to seek out help. The sooner you begin managing your credit well and making timely payments, the sooner your credit rating will improve. Communicating with your debtors when you are having difficulties will help you to negotiate new payment terms or seek out new programs that can help protect your credit score.
Credit Resources
The Community Financial Education Foundation (CFEF) is a non-profit, national financial literacy foundation dedicated to educating Americans on financial responsibility and teaching skills that allow individuals to manage their personal finances and live more effectively.
