Keeping Good Credit

Keeping Good Credit

Keeping Good Credit

Once you've established good credit it's very important to keep it that way. If you let a good credit score slip away you will pay far more in interest for future borrowing. The rule of thumb here is the higher the credit score, the lower interest you will be charged when applying for new credit.

Getting more credit is very important to keep or improve your existing credit score. The credit reporting companies who review your credit history will look favorably at a new credit card being added to your report. Although just because you have a new credit card doesn't mean you can go out and run the card up to the limit. Doing this will be looked at as a high limit account. If you don't pay off this high limit charge on the first or second billing cycle your credit score can be affected.

Remember, that credit cards are only a tool to be used in favor of carrying around huge amounts of cash. In this day and age everywhere you go to buy something the merchant will have a credit card swiping device in the counter so you can easily use your credit/debit card for your purchases. There are many stores in high crime areas that will not accept cash at all. So using a credit card is the only way to buy anything from these merchants. Therefore, it's almost essential that one should have at least one or two credit cards. The trick here is money management. If you don't save your receipts and record the spent amount after purchases you can get into trouble. You never want to spend more than you can easily pay off at the end of the billing cycle. By doing this you are using free money, meaning no interest will be charged. Even though the credit card companies do not like this practice because they are in business to make money and interest paid is profit for them. This being said, they must report to the credit reporting companies your credit history. Using the card or cards every month and paying them off in full when due will guarantee your credit score will improve over time.

This is where family budgeting comes in to play. It's essential you know exactly how much you can spend. After you have determined your income for the month, add up all your fixed payments, mortgage, automobile, insurance, savings deposit, phone, cable, or anything you pay the same every month. Subtract this amount from your total income after taxes to find the amount you can spend on all other things, gas, groceries, entertainment, dining out, and other purchases.

This is how you know how much you can spend on your credit cards each month and still be able to pay the cards off at the end of the month. Again, free money.

Keeping old credit card accounts active is another way to maintain a good credit rating. The credit reporting companies view this as measure of credit worthiness. As long as you are able to pay off these older cards each month you will never get into trouble with the credit reporting companies and your credit score will reflect this in as it will keep going up. This is good for you as I said at the beginning of this page, "the higher the credit score, the lower interest you will be charged".

Review:

Review your monthly spending routine; keep a record of what you have spent each month.

Use your credit cards regularly, but do not over spend your limits.

Make sure you pay all your bills on time.

Do not close older credit card accounts, this will actually hurt your credit score

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