William Doonan - Tax Attorney in New York

Thursday, May 4, 2017

How to Maintain a Great Credit Score

How to Maintain a Great Credit Score by William Doonan

Your credit score is most commonly and frequently used by lenders to determine your financial strength when you apply for a loan or a credit card. A lower rate may mean that you cannot qualify for credit or that your interest rate is higher than it other would be. This essentially means that a lower credit score costs you money through the form of higher interest charges. Your credit rating may also be reviewed when you apply to rent a house, open up a utilities account, purchase auto insurance, apply for a job and more. As you can see, your credit report plays a critical role in many aspects of your life. If you are looking for a way to improve personal finance and take control of your money and life, learning more about credit ratings is a good starting point.

How to Maintain a Great Credit Score

How to Maintain a Great Credit Score by William Doonan

A perfect credit rating is a score of 850, but you should be aware that very few people who have even the most practical financial habits achieve this pinnacle rating. A good score is usually around 680 or higher, and an excellent score is approximately 750 or higher. While perfect credit is not necessarily a reasonable goal, achieving and maintaining a good to excellent score is. You should initially strive to pay all of your bills on time each month. Late payments are a surefire way to lower your credit rating. In addition, avoid opening too many credit accounts or loans, and avoid having high outstanding balances on credit cards. Ideally, any balance that you carry over from month to month on your credit card will only be half or less of the total credit limit. Remember that making regular monthly payments on time is only one aspect of your financial health that is analyzed by your credit report. Your total debt balance as well as trends associated with taking on or reducing debt from month to month is also analyzed.

Understanding Common Credit Mistakes to Avoid

Your credit rating is a reflection of your personal financial management efforts and overall financial health. Therefore, it is often wise to improve your financial health if you want to improve your credit rating. Many people do not have an adequate amount of money saved in a rainy day fund. Without savings to rely on in a time of need, taking on debt is the most common solution. Therefore, make an effort to save money regularly. Also, avoid living a lifestyle that you cannot afford. When you live more lavishly than what you can afford, you inevitably will take on debt. This can catch up with you over time as you regularly increase your debt balances each month.

It is important to have a decent or good credit rating, but remember that this simply a sign of good personal finance habits and financial well-being. If you want to improve your credit rating over time, focusing on reducing debts and increasing savings balances can help you to achieve the results you desire.

William Doonan is a tax law and legal expert in New York.

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