Set Your Credit Goals – Guest Post
Of all the numbers that you consider significant in your life, your credit score is probably the most important. This financial indicator plays a role in everything from where you get to live to what kind of car you can drive, so it’s important to handle it with care.
If you’re like most people, you dream of one day buying a house (or if you have one already, buying a bigger house). You may also want to purchase a car, or find an insurance policy with a low premium. Your credit score determines if and how quickly you will be able to do all of these things. It can also affect how much rent you pay, and how much of a deposit you have to make for home services such as telephone and Internet. And these are just a few of the reasons you’ll want to set goals that lead to good credit.
Your credit card use will be one of the most important factors in getting a high credit score. The best credit card habit to develop is to be a transactor, which is a card holder who pays his balance in full each month. Though credit card companies would prefer you to be a revolver (which is how they make money), paying interest on a balance that you carry from month to month can be both expensive and detrimental to your financial goals.
However, even if you must have to carry a balance, you should make sure that it is well below your credit limit, for two reasons. First, you don’t want to find yourself in a tight financial spot because you were within just dollars of your credit limit and your bank instituted an account fee that made you exceed that limit. Secondly (and most importantly), a card holder who is always nearing his or her credit limit is seen as a high-risk consumer to credit rating agencies, so this could drive your score down.
Another facet of good credit card use, which can be practiced throughout other areas of financial health as well, is paying your bills on time. You will be seen much more favorably by credit rating agencies and lenders if you manage your accounts in a timely manner. To make sure that you can always pay on time, you should plan your payment at least several days in advance of when the bill is due. Also, signing up for online account management makes it much more convenient to pay on time, in addition to providing you with written confirmation of when your payment is received.
Another worthwhile goal to set is to limit your spending to just one or two lines of credit. This is because the more credit your request, the lower your score dips. Remember those rating agencies keeping track of your every financial move? Well, they also know each time a credit card company or lender looks into your credit history, and too many views can result in a lower credit score.
Financial health, much like physical health, is the result of a learned practice. If you commit to these habits, you’ll reach your goals and your credit score will only improve with time.