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How to Maintain a Good Credit Rating

Your credit report is the stepping stone to your financial well being.  Good credit or bad credit can make or break your chances at getting  a mortgage, being approved for a credit card, getting an automobile and earning a favorable interest rate on a loan.

If you are in the market for a loan, the higher your credit score, the lower your interest rate.  In order to earn a more favorable interest rate and put money in your pocket, you need to be aware of your credit rating and what you can do to make sure it is the best it can be.   

The easiest way to maintain a good credit rating is to regularly pull a copy of your report to make sure everything is accurate. The biggest mistake a consumer can make is to ignore reporting errors.  The Fair Credit Reporting Act (“FCRA”) is the federal statute that was enacted to protect consumers from the credit reporting industry.  Under the FCRA you are entitled to one free copy of your report annually.  If you regularly review your report, you can ensure its accuracy.  If your report has erroneous information, under the statute you are entitled to dispute inaccurate information.  Draft a letter to the credit reporting agencies listing the errors and request an investigation. 

A second way to improve your credit or maintain a good credit rating, is to make timely payments.  While this is easier said than done, late payments can damage your score and making timely payments will ensure your score remains in tact.   Your payment history accounts for 35% of your credit score so keeping up with all of your payments will help keep your score up.  

Third, avoid reaching your credit limit on your credit cards.  Credit utilization, or the total amount of credit used measured against the total amount of available credit accounts for 30% of your credit score.  As a rule of thumb, trying to keep your used credit at least 10% below your credit limit will ensure your score is not too severely damaged.  However, maintaining zero balances, or as close to zero as you can, will ensure a higher score.

If you would like additional information regarding your credit report and credit score, contact SmithMarco P.C. for a completely free case review.

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