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How to Maintain a Good Credit Report?

By Janet Lacey
Published: Sunday, September 20th, 2009

So before we think about how to maintain a good credit score, let’s first try to understand what a good credit score is? A credit score is nothing but a reflection of what your financial stability is like at the moment. It’s more like a snap shot or an SAT test which reflects your current situation.

So how do we go about maintaining a good credit score?

Firstly, make sure you do not have any debts. This is difficult. But at least make sure that whatever debts that are accumulated are the least possible. For example, when you already have a car and are paying for it every month, it doesn’t make sense to get another one on loan!

Secondly, make sure you pay off your debts whenever possible. Don’t wait for the last due date. This will only mean that you are paying the highest possible interest. Just keep paying as and when you accumulate a surplus. Don’t let it build up on you. This way, you are ensuring that the loan is manageable and also that it does not end up affecting your credit score.

Thirdly, make sure that the credit limit you have used on your credit card is at a minimum. For example, use just 10% of your credit limit on your credit card for at least three months before you file for a loan. Since the score is a current score, it will not be affected by your past usages of your credit card. And make sure to curb your instincts to accumulate points during those three months. Nowadays a lot of cards give out points for usage. But it’s another story that those points when redeemed give out a pittance in remittances.

Fourthly, when you go out to buy stuff like a car or a home, make it completely clear to the seller whether or not you intend to take a loan. If you are taking a loan, be prepared that the seller might go and check up on your credit score. He might conduct an enquiry because he will be arranging the loan. If you are not taking a loan, make it explicitly clear to him so that he won’t make that enquiry. Because each enquiry, no matter how innocent will take your score southward.

Lastly, there is the factor of how long you have held an account or a number of accounts. This constitutes a very small percentage of the score, but still is a factor. Obviously, youngsters will have a lesser score than an old timer. But its only right, because it’s not wise for a young kid who just started working to go out and buy stuff on borrowed money. Though that is the trend of the day and age, it does not make for a wise decision in the long term.

So these are the basic steps one can take to ensure that the credit score is kept as high as possible. Best of luck!

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