We live in a loan-oriented society and, for most of us, borrowing is critical. We need a car or can do better financially if we buy a home instead of rent sometimes. We want to start a business or pay for tuition to live better lives. These are not frivolous moments. A credit score is critical at important junctions in our lives.
You need some basic understanding of money to understand loans, but in the modern era it also pays to know a few tricks to helping your credit score that go beyond simply, “don’t make late payments, ever.†That’s obvious. But here are some less obvious methods of keeping credit scores healthy…
1. Have Fewer cards
Most of us fool ourselves into thinking that many revolving debt accounts – many credit cards in our wallets, in other words – means we are masters of our own fate. If we can manage many cards at once, that should keep a score high, we think. We think that will show up as a positive in our credit histories.
But the more cards you have, the more it works against you. It can look like your spending is all over the place and that you are borrowing to pay off other loans. Watch your spending and keep it consistent, especially with paying off the cards. It’s fine to have several cards once you’re responsible enough to use them, but go into it slowly.
2. Pay Twice A Month
Here’s a smooth trick that will help. Instead of paying your balance down to zero with one payment at the end of a month, do it in two payments.
One factor that goes into your credit history is how large of a balance you have in what is known as a debt to credit ratio. That means, if you have a $2,000 line of credit and you never borrow more than $50, you have a very low debt to credit ratio. Conversely, if you have a $2,000 line of credit and you borrow $2,0000 your debt to credit ratio is very high – 100%.
