Your credit score is super important, I suppose this goes without saying. This three number piece of math will determine whether you can buy a car, a house or even a computer. Your credit score can even put you in a situation where you spend more or less on some of these things. The thinking is that those with worse credit, in the aggregate, are a greater risk to financial institutions and will therefore cost more money as debtors. This may not be true of every single case, but again, in the aggregate it’s extremely accurate. For those that intend to be good and productive members of society, it’s important to stay in proper financial standing and the best indicator of this standing is your credit score. The best advice for excellent credit is to manage your finances responsibly over time. Here are three important steps to maintain good credit.
Check Your Credit History
Use a free credit score reporting tool online. Examine this report carefully, as it’s not uncommon to find an error. Think about all of the potential points of failure when you are paying bills, your car or home loan. Sure most of the system today is run by computers, but there are certainly human inputs here and there, and errors do occur. It would be a real shame for you to go on living with a worse credit score because of an error in your history, perhaps a late payment incorrectly listed, or something of this nature. Do your due diligence. Make sure you pour over this credit report to make sure everything is accurate.
Now that you’ve confirmed that everything about your credit history and report is kosher. It’s time to clean up your act. A good piece of information to keep in mind is that credit is determined largely by your ability to pay your debt. The suggestion here is to find a way to effectively manage the various credit mechanisms that you use. Keep a list of all of the monthly obligations that you have. Some banks offer payment reminders through their online banking. You could also enroll in automatic payment, this way the bank will deduct your credit card bills direct from your bank account. Be careful with automatic payments however. It’s important to instill a sense of good money management, and having everything on auto-pilot can lead some down a weird path.
Pay Down Your Debt
Truth be told, while your credit score is key to understanding your financial standing, a far more satisfying and relevant achievement is to actually pay down your debts. Not only will this help to improve your credit score, it will help to bring you above water. Maybe one day, you can save a buck or two. Come up with a plan. Budget yourself. And pay down this debt. Make a list of the credit obligations that you have and target the debts that have the highest interest rate. Once this debt is cleared, cancel the credit card and trim your budget to a more reasonable and manageable position. This will pay dividend towards your credit score and your overall financial health.