Seven Do’s and Don’ts to Protect Your Credit Score

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Title: Seven Do’s and Don’ts to Protect Your Credit Score

In an increasingly credit-driven economy, the importance of a robust credit score is undeniable. It’s the number that lenders, landlords, and even some employers use to gauge your creditworthiness. Unsurprisingly, understanding how to protect your credit score is critical. Keep in mind, however, this involves more than just paying your bills on time. There are specific do’s and don’ts you should follow to ensure your credit remains healthy and reliable.

DO’S

1. DO Pay Your Bills On Time:

Your payment history is the biggest factor influencing your credit score, accounting for about 35% of the total. Late or missed payments, especially those over 30 days late, can significantly damage your credit score. Thus, always ensure to pay your bills on time, even if it’s just the minimum payment.

2. DO Regularly Check Your Credit Report:

Regularly reviewing your credit reports for errors is an effective way of protecting your credit score. Inaccurate information can negatively affect your score. You’re entitled to a free annual credit report from each of the three major credit bureaus, Experian, Equifax, and TransUnion. If you find any inaccuracies, dispute them immediately.

3. DO Maintain a Low Credit Utilization Ratio:

Credit utilization ratio is the percentage of your total available credit that you’re using. High utilization can be seen as a risk and could potentially lower your credit score. Try to keep your utilization ratio below 30% to maintain a healthy credit score.

4. DO Apply For Credit Sparingly:

Each time you apply for a loan or credit card, a hard inquiry is made to your credit report, which can temporarily lower your score. Abstain from applying for credit too frequently, as multiple inquiries within a short time can be viewed negatively by lenders.

DON’TS

5. DON’T Close Old Credit Card Accounts:

Closing an old or unused credit card can negatively impact two aspects of your credit score: your credit age (length of credit history) and your credit utilization ratio. When you close an account, you lower your total available credit, which could increase your utilization ratio.

6. DON’T Co-Sign On Loans If It’s Avoidable:

Co-signing a loan or credit card makes you equally responsible for the debt. If the primary borrower is late on payments or defaults, your credit score will be impacted. If you must co-sign, make sure you trust the person and their financial responsibility completely.

7. DON’T Ignore Your Bills:

If you’re struggling to make payments, don’t ignore your bills. Instead, contact your lenders immediately. Many are willing to work with you to arrange a payment plan. This approach can prevent your accounts from being sent to collections, which can severely damage your credit score.

In conclusion, maintaining a good credit score is not cumbersome if you follow these seven do’s and don’ts. Consistency is crucial — continue paying your bills on time, keep a low credit utilization ratio, regularly monitor your credit report and be savvy about new credit and co-signing. By following these steps, you’ll build a credit history that will make future financial endeavors much easier and more accessible.

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