6 Ways to Spring Clean Your Credit
Spring is a great time for a fresh start and cleanup but not just for your home or yard. It's also a great time to clean up something very important in your financial house – your credit.
Whether you're looking to establish credit, give some TLC to one that could use some improvement, or already have great credit, there are some important steps you can take to ensure your credit is the best it can be. Because let's face it, a strong credit score will not only help you qualify for credit but also help you get the best rate to save money.
Here are 6 ways to spring clean your credit:
- Pay your bills on time. The biggest determinant of your credit score is your history of paying your bills. Late or missed payments will negatively impact your score. To ensure that doesn't happen, set bill payment reminders or arrange to have payments made automatically. And remember, just because you may not have seen a bill in the mail or via email doesn't mean you don't have to make a payment.
- Don't use all the credit available to you. Another factor in your credit score is your credit utilization, which is the amount of your available credit limits that you actually use. In general, lenders like to see that you only use about 30% of the credit available to you. If you use more than that, you can negatively impact your score. One way to lower your credit utilization and raise your score is to pay down revolving debt, which frees up available credit. There's an even simpler way to lower your utilization: use less credit.
- Leave old accounts open. In the world of credit scoring, age matters. Lenders like to see that you have a long and established history with creditors. So, even if you don't use a credit card or other revolving debt available to you, it might make sense to keep those accounts open. In fact, it's not a bad idea to make a purchase now and again to keep them active. Just make sure you make your payments on time.
- Only use credit when you need it. It seems like wherever you go today someone wants to entice you with a special offer to open a credit card to earn some special bonus – like free airline miles or a big discount on your purchase. Before you sign up for those cards, make sure you understand the impact they can have on your credit. Every time you apply for credit, a hard inquiry is done on your credit report, which can negatively impact your credit score. That's why experts advise that you don't apply for multiple credit cards at the same time or apply when you need a larger loan, like a mortgage.
- Monitor your credit. One of the most important steps you can take in managing your credit score is to monitor it regularly. Keeping track of your credit score can help you see the impact of your credit usage and guide your financial decisions. It can also help you prepare if you need to borrow later on down the road, say to get a mortgage.
- Get a copy of your credit report. Another great way to monitor your credit is to get a copy of your credit report. You can get a free copy from the three credit bureaus – Equifax, TransUnion, and Experian – at annualcreditreport.com. Viewing your credit report will help you see your credit lines and balances as well as help you identify and correct mistakes, such as incorrect addresses or accounts that don't belong to you. It could also help you determine if you're a victim of identity theft.
Get growing – tend to your credit today!