Stay Current on Accounts – Make it a point to stay current on all your accounts. Many people find it helpful to set up payment reminders or auto-pay, so they don’t forget about the bill. With auto-pay you should make sure to check that the funds are being deducted and reflecting on the account. One new negative item reported to your credit reports can penalize you 30-100 points.
Opening New Accounts – When you open a new credit account you are making your average age of credit younger, therefore your scores can drop. The older your active credit accounts are the better it is for your score. Before opening credit take into consideration your timeline of applying for a major purchase like a new home or refinance. And of course, opening new accounts can cause a hard inquiry which are third party credit reviews, and this can also hurt scores. Be mindful of balance when opening accounts. Consumers must build their credit report profiles for short and long term strength, but not overdo it.
Keep Balances Low – When you want your credit scores to reach their full potential, pay your credit cards down to at least 10% of the limit, if not paid off in full. Do this a few months prior to application or when your credit will be pulled. If trending data is going to be used for your application, then having low balances on credit cards for years in advance would be more helpful.
Become an Authorized User – Becoming an authorized user on certain accounts with a friend or family member’s old, excellent standing credit card can give a boost to your credit. You will want to make sure it is much older than your accounts and it has great credit history (no late payments or negative information) as well as low balances. You do not have to use the account or even have a card to be listed as an authorized user or for the account holder’s credit to reflect on your own.
Stay Active – When an account goes unused for an extended period, creditors reserve the right to close it. This can hurt your average age of credit and available credit. For instance, if a creditor closes an account scores can drop due to a change in your variety of credit. The account that closes can eventually drop off your credit and take away the average age of your credit, if the account is an old account. Therefore, make sure you’re using these accounts a few times a year even if it’s a small amount just to keep them active.
Pay Attention – Legally each credit bureau must provide a free credit report to each consumer upon request annually. We recommend taking an extra step in credit protection by setting up credit monitoring. Keeping an eye on your credit reports and scores consistently is the best way to stay on top of what’s happening.
Protect Data – You own your personal data. Value it and protect it. With cyber-crimes reaching all-time highs and personal data being shared with many third parties, it’s important to invest a small amount of money in the protection of your personal data. The key to identity theft protection is being alerted quickly and taking action early in the theft process. If you don’t have any monitoring or protection of your personal data or credit reports then the risk of harsher identity theft consequences goes up.
Eliminate Red Flags – Have a lingering collection you simply don’t want to pay? Anything negative on a credit report can be perceived by banks and creditors as a red flag. Dealing with collectors can be frustrating. At the end of the day if the debt is accurate and cannot be removed from your credit, then the next logical step is to settle or pay the debt to eliminate the negative balance owed from your credit reports. Coming out of pocket for something you question can be a tough pill to swallow, but sometimes it’s best to eliminate the red flag so it doesn’t linger, change hands and re-report under a different name, ultimately bringing down your scores, costing you hundreds if not thousands of dollars on your credit related transactions.