When you think about ways to bolster your credit report, a long list of to-do items may pop into your mind. However, due to the way credit reports work, doing less may actually help your score over the long term.
Ditch The Bad Spending Habits
If you utilize credit cards to maintain a healthy credit score, like many Americans do, remember just paying off the balance is only one part of the equation.
Because credit scores take into account the available credit amounts and your usage tendencies, spending less (while paying it all off regularly) will make you shine.
Keep in mind that your credit cards are vehicles of payment, not loopholes to purchase more than you can actually afford. The amount of credit you use indicates how you handle money over time, and by staying well below your credit max, you indicate to whomever looks at your report that you are aware credit cards are financing vehicles, not free passes.
Financial advisors suggest following the 30% Rule for credit usage. Find out what it is here.
Bag The Hurtful Lines
Sometimes holding multiple lines of credit can be beneficial, and some of the easiest lines of credit to maintain are credit cards. However, misuse of even one credit card can hurt your credit. You may have a student loan, a mortgage, a car payment and three credit cards that are well-handled, but that one card you forget about or let slide can seriously put a dent in all your hard work.
Take the time to revisit your credit report and inventory all your lines of credit. If there are a few unnecessary items that are doing more harm than good, get rid of them.
Yes, having multiple lines looks good, but not handling each and every one of them with care looks bad. Toss out the offenders.
Lewis Mandell, author of “What To Do When I Get Stupid” and Professor Emeritus at the University of Buffalo, shared with Quizzle, “Limit your use of actual and contingent credit.” If you don’t, he cautioned, your credit usage tanks. It’s more important to keep a smaller number of credit lines in tiptop shape than a bunch of poorly handled lines or an olio of well-handled, mishandled and blah lines.
Take the time to acknowledge your financial tendencies and start working on any bad habits you may discover. Declutter your financial life one step at a time, beginning with taking a long, hard look at your credit report.
Your credit report functions like an elaborate report card, focusing exclusively on your financial wellbeing. Think of your credit report like a sock drawer. If you have a perfectly formed pile of matched socks directly on top of a mismatched pair, an inside-out dress sock and a few rogue singles, the whole drawer looks messy, despite those few gloriously folded pairs.
Take responsibility for your financial actions and embrace the fact that you have the opportunity to refurbish your credit report and represent yourself favorably. Give your credit a little TLC and let it in turn speak highly of you.