Good credit habits are nurtured. It requires conscious effort to keep your personal credit in good standing. Unfortunately, many people had to learn the hard way about the importance of correct financial management. In this article, let’s discuss specific credit habits that everyone should implement throughout their lifetime:
Keep credit card charges minimal.
Many cardholders get stuck in bad credit as a result of uncontrolled credit card use. If you frequently charge large bills to your credit card, you may find it difficult to pay your full balance by the end of the month.
The consequences of carrying a balance is that you end up paying the interest rate charge and you put yourself at a greater risk of incurring bad debt. Hence, the best way to protect yourself from bad credit is to control your credit card spending and ensure that you can pay off your charges in full and on time.
Understand your creditor’s terms and conditions.
Whether you are applying for a credit card or a loan, it is crucial that you understand your rights, obligations and limitations as a borrower. Do you take the time to read the complete contract? Or do you simply scan through the fine print?
If you get into the habit of signing up for credit without evaluating the agreement, you could find yourself in trouble later on. Some lenders charge hidden fees and impose unreasonable terms on their customers. These conditions could be stated somewhere in your contract but if you don’t bother to check what the fine print says, unpleasant surprises may await you.
Manage credit wisely.
Acquiring credit is essential to build personal credit history. However, in order to build and maintain good credit, you should be able to manage debt and repayment responsibly. The Fico score is based upon several factors, with 35% based on payment history and 30% based on credit utilization. Keeping this in mind, it’s easy to see how timely submission of payment and credit utilization can affect your personal credit, positively or negatively.
Monitor you accounts regularly.
It’s important to be aware about the status of your accounts such as credit card accounts, savings accounts, etc. Many credit card companies today offer online access so you can check your account from the internet at any time. You should take advantage of this opportunity to make sure that your accounts are updated.
Invest in credit monitoring
We used to advise our clients to check their credit quarterly or at least twice a year. But with ID theft becoming so common, we now tell our clients to invest in credit monitoring.
With credit monitoring you will get notified everytime there is a change to your credit report and most monitoring services make it easy for you to stop ID theft in the beginning stages! They also have tools available to help you dispute inaccurate information.
It is a good idea to order a copy of your credit report from each of the three credit bureaus once every six months. Under the FCRA (Fair Credit Reporting Act), consumers are entitled to a free credit report each year. You should take advantage of this privilege to ensure that your personal credit report contains accurate information about your credit activities. Take note that erroneous details can significantly pull down your final credit score. See to it that negative information such as a record of bankruptcy, foreclosure, tax liens, does not remain in your report for more than 7 years.