Achieving good credit takes time, discipline, and commitment to responsible financial behavior. Don't let that hard work go to waste - keep an eye on your account and make financial decisions carefully. Here are five tips to help you actively protect your credit score.
Protect Your Online Identity
It may seem that each new week brings stories of identity theft linked to unprotected passwords and online financial accounts. To protect yourself and your credit from fraudulent activity that could lower your credit score, change passwords on your devices and financial accounts regularly. Don't use the same passwords for multiple accounts, and avoid using words that are easily figured out - such as your birthday or address. Make it a habit to log out of your account every session, especially if you're using a public computer.
Be Careful About Closing Credit Cards
Sometimes borrowers choose to close credit cards when the rate is too high or if they don't use the card often. However this may impact your credit score, because it affects your credit utilization ratio. The ratio compares your total card balances against your total available credit. If you close a credit card with a large limit, you're reducing your available credit. And if you have a balance on another card, this increases your credit utilization ratio (not a good thing), because your total available credit has shrunk compared to your total balances, which stays the same. This ratio is one of the factors used to calculate your credit score. Review your credit card balances carefully before closing cards with higher limits.
Pay All Bills In Full On Time, Every Time
If you think skipping your little bills or not making the minimum payments on less "important" credit items won't impact your credit, you're wrong. While staying up-to-date with payments on your big bills, like your mortgage payment, auto loans, or student loans is important, so is staying up-to-date with your little bills. Late or missed payments on utility bills, cable bills, and cell phone bills may lower your credit score. Protect your score by paying all bills in full on time, every time.
Don't Apply for Many Credit Products at the Same Time
Shopping for certain financial products such as an auto loan or mortgage, will only count as one inquiry, if done within a two-week time window, but this is not the case with all financial products. While applying for one new credit card has just a small affect on your score, submitting several credit card applications through different lenders at the same time can have a negative impact on your credit because it flags you as a credit seeker. To protect your credit, limit your types of credit applications and those that affect your credit with each inquiry. Use a tool like LendingTree's loan comparison calculator to research your borrowing options and limit your credit hits to the lenders that are best suited to your financial situation.
Check Your Credit Regularly
Sometimes, despite our best efforts to prevent identity theft, manage credit accounts, pay our bills when due, and limit new credit products, our credit is compromised due to error or fraud. When this happens, it's best to find out as soon as possible in order to notify authorities, lenders, and the credit reporting agencies in order to prevent further incidents and protect your credit. At the very least, get your free credit score and check your credit at least annually, for free, by visiting My.LendingTree.