Author: Amanda Hall, CFEd, Education Engagement Manager, Retirement Plan Consulting
Did you know that your credit score impacts more than just your ability to borrow money? Utility providers, rental companies, and even prospective employers evaluate your creditworthiness to determine if and how they will do business with you. A healthy credit score can give you an edge in more ways than you might imagine. Here are some tips to consider as you as you work to keep your credit score fit.
Keep Credit Utilization Below 30%. This means that you shouldn't carry balances on revolving debt (like credit cards) that are higher than 30% of the available limit. For instance, if your credit card has a $2,000 limit, try not to hold a balance above $600. Remember, the credit bureaus receive reports on your account balances and whether you made a payment on time. They won't know if your balance being carried over each month or paid in full and charged up again. Having balances over 30% of your limit on any given statement period could create the illusion that you're maxing out that debt, which is a major risk factor in the eyes of the credit bureau.
Make Your Payments On Time. Make your minimum payment each month and don't be late.One late payment can do serious harm and it can take a couple of years to redeem yourself in the eye of the credit bureaus. Late payments reflect poorly on your report for at least two years. If you are a couple of days late making a payment, don't panic just yet! Institutions only report an account as "late" if you're at least 30 days past the due date. Being a few days late may cost you a fee, but it won't impact your credit.
Review Your Credit Report Annually. Reviewing your report goes far beyond tracking your score. Look for inaccuracies and submit disputes if you find any. Specifically look for accounts that aren't yours, credit pulls you didn't authorize, incorrect names or addresses, past due accounts, etc. An inaccurate address or unauthorized credit requests on your report can be a sign of attempted identity theft. Financial institutions can also make reporting mistakes that may negatively impact your credit. Ensure everything is accurate and take immediate action if you spot anything out of the ordinary. You can access your full credit report for free each year by visiting annualcreditreport.com.
Small changes to how your manage your credit can have a meaningful impact. Consider speaking with your HORAN financial advisor if you have questions about your credit history.
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