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How to Maintain Good Credit

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How to Maintain Good Credit

Once an individual has credit they begin to build what is called a credit history. Based on your credit lenders, landlords, and even employers use it to make judgment on your credit history and ability to repay. There are many benefits to maintaining a good credit score, including getting lower interest rates on your credit cards and loans and saving money on insurance and security deposits on new utilities and cell phone service.

Here are few tips to maintaining a good credit history:

-Familiarize yourself with what goes into a good credit score. Because the more you know the easier it will be to maintain a high score. The five key components used to calculate your credit score include your payment history, level of debt, credit age, mix of credit, and recent credit.

-Pay at least the minimum payment due on time, every month. Certain bills do not get reported to the credit bureaus when you pay them on time, but they could show up on your credit report if you fall behind.

-Make sure to keep your credit card balances low. This means maintaining your credit card balances within 30% of your credit limit. The higher your credit card balances are, the worse your credit score will be.

-Take the time to review your credit report at least once a year to make sure it’s accurate. Unexpected errors can appear in a credit report at any given time that can cause credit to be denied.

-Do not close a credit card. When you close a credit card, your credit card issuer will no longer send updates to the credit bureaus and the credit scoring formula will place less weight on inactive accounts.

-Limit applying for new credit. Each time you apply for credit your credit score takes a minor hit. Credit inquiries are 10% of your credit score, and opening a new credit account also lowers your average credit age, by 15% of your credit score.