7 Ways To Maintain The Best Credit Score
Managing your credit score will help you qualify for the highest purchase price possible while also positioning yourself to get the lowest borrowing cost for your mortgage. Here are the 7 Ways to Maintain the Best Credit Score:
1. Pay Your Credit Cards and Lines of Credit (revolving credit) each week instead of once per month:
I pay my revolving credit to $0.00 each and every Wednesday. This way, even if I forget one week or pay a couple days late, I have already paid the credit card 3 times that month.
Paying once per week will help avoid any late or derogatory credit and it will help keep your balance owing to a lower
2. If you're unable to pay your revolving credit in full each week and need to carry a balance, it's advised that you follow The Rule of 75
The Rule of 75 says that in order to keep your credit score as high as possible, even while maintaining a balance, you should keep your balance(s) owing at or below 75% of the cards' limit. For example, if you have a $10,000 limit on your credit card, you should keep your balance owing at or below $7,500 at all times. This leads me to my next point:
3. Don't rack up your credit cards and lines of credit at any time during the reporting period (even if you always pay the debts to $0.00 every month)
This happens most often with consumers who are Self-Employed and need to put purchases on their company credit cards and await the funds from Accounts Receivable months later. It's always best to follow the Rule of 75 as the credit score will drop dramatically even if you pay off the revolving credit in full each month.
4. "Ignore" the interest rate on your credit cards
I know this sounds counter-intuitive and if you're managing your credit and paying it down each month, certainly use the cards with the lowest interest rates instead of the ones with high interest. But, if you're maintaining a balance, following the Rule of 75 is again, key, in helping achieve the highest credit score. If you are getting close to the 75% threshold on your low interest credit card, start shifting funds or start using the card(s) with the higher interest instead of pushing the balance on the low rate card over the 75% mark.
5. Use more than one credit card each month
In order to maintain the best credit score, using only one card will stall the increases and gains in your credit score. Instead, I recommend you use one card for Gas and the other for Groceries. These are expenses most people incur each week and if you're maintaining two credit cards or more and following the above rules, you will have a great credit score and receive the best and lowest borrowing rates for life!
6. Pay off any and all judgments, collections and accounts that have gone in arrears
I know it's not always what anyone would prefer to do, especially if there was a dispute involved, but unfortunately, one of the biggest impediments to maintaining a great credit score is when collections, judgments and accounts with arrears appear on your credit report. Even if you feel you're not in 'the wrong', you can often settle these for much less than what the creditor is asking for. Often you can negotiate to pay a portion or even half of what the creditor is seeking.
7. Set up reoccurring payments such as Cell phone bills to be paid automatically every month
Setting up your cell phone bill to be paid with one of your credit cards will reduce the number of bills you have to keep track of, and right or wrong, missed payments on cell phone bills actually are MORE detrimental to your credit score than if you missed a payment on your credit card. Remember to pay once per week instead of once a month!
Chris Adkins
President, CEO and Broker Owner - AHA Mortgages
