Your credit score is a critical factor in just about every facet of your life. For example, a strong credit score can net you the best financing terms, saving you money on interest and fees. In addition, with an excellent credit score, you’ll quickly be approved for leases, utilities, and that dream job. It can be challenging to maintain good credit, but it’s doable. Here are five secret habits of people with high credit scores.
1. Checking Their Credit Report is Routine
According to Consumer Reports, 34% of consumers said they found mistakes on their credit report. For instance, 29% of consumers found errors in personal information, and 11% found account information errors. These mistakes can hurt cause your credit score, causing it to drop by hundreds of points.
People with high credit scores make it a habit to check their credit reports regularly. You’re entitled to one free annual report from each of the three credit reporting agencies.
Here’s what to look for:
- Misspellings in your name
- Incorrect address and social security number
- Closed accounts listed as open
- Late payments when you have a record of always paying on time
- Unrecognized accounts
- Accounts listed in default when there are none
- Unknown debt reported to collections.
If you find errors, report them right away. People with high credit scores are assertive. Follow up with the credit reporting agencies and your creditors to confirm that they have made the necessary corrections.
2. They Only Apply for Credit When Needed
One of the top-secret habits of people with high credit scores is that they only apply for credit when needed. When you make multiple applications for credit cards or personal loans within a short period, it could indicate that you have money problems. As a result, lenders might consider you a credit risk. Furthermore, hard pulls on your credit report negatively impact your score.
3. They Pay Their Bills On Time
Your bill payment history makes up 35% of your credit score. Therefore, it’s the most critical factor in determining your credit rating. People with high credit scores pay their bills in full and on time. If you struggle with this, try downloading apps to help you or set up as many accounts as possible for autopay.
4. They Pay More Than the Minimum
People with high credit scores don’t like to carry debt. They prefer to keep as much money as possible to pay themselves rather than paying interest to creditors. If your cash flow is tight, paying the minimum is much better than skipping a payment. But it’s better to do everything you can to pay the balance in full. Making only the minimum payment will keep you in debt much longer. Ultimately, it could take you 30 years to pay off an initial $5,000 charge. People with excellent credit keep their balances low, so they can easily pay the bill in full.
5. They’re Careful About Credit Utilization
Your credit utilization ratio makes up 30% of your credit score. Therefore, it’s imperative to keep this ratio as low as possible. Experts suggest that you should aim for no more than 30% credit utilization. But one of the secret habits of people with high credit scores is that they keep their utilization around 7%. A lower utilization ratio indicates that you handle credit responsibly.
Adopt these five secret habits of people with high credit scores, and you’ll improve your entire financial life. You’ll receive better financing, giving you more money to put toward your financial goals. With less money going to interest payments, you’ll have more to invest in retirement and emergency savings.