How to get healthy credit

Eating healthy is important to living a long term life. Similarly, having healthy credit is crucial to getting the best rates on big purchases like a home, a new car or a loan. 

Knowing how to build and maintain healthy credit makes all the difference. Giving yourself time to build your credit history, keeping an eye on your credit score, and taking out credit lines incrementally instead of all at once are a few things you can do. 

Here are a few more things to know that can help you on your way.

Utilization Ratio

Your utilization ratio is the percentage of credit you use on your available credit line. Ideally, you want to be using 30% or lower to keep your credit score healthy. 

Even if you are paying off your monthly balances in full, if you are using a large percentage of your credit, it impacts your score. Consider paying throughout the month to keep your utilization ratio low.

Good Debt, Bad Debt

It's a good idea to try to get old debt removed from your credit history once you’ve paid it off. 

If you can keep a good debt on your history, one that you’ve paid off and made on time payments for throughout, it helps your score. It makes sense to leave these accounts open, too.

Pick one or two cards that you use for everything and eliminate all of the other small charges on various cards. Ideally, you want to use the cards that have the best interest rates. 

Keeping debts on multiple cards negatively impacts your credit score. Try to  consolidate your debt down to just a couple of cards and pay off the rest.

Keep Watch on Your Report

Check your report often. If you find a mistake, contact the creditor to have the issue resolved immediately. Maintaining a watch on your credit can help you maintain a positive record.

Instead of putting too much stress on your credit, set yourself up for success. Build positive payment habits and use your credit responsibly. 

When you know you are going to need credit, focus a little more diligently on your score and be proactive about raising it. 

If you keep a watchful eye over your credit, pay on time, take out only as many credit lines as you need, and keep good history on your report, when it comes time to apply for a bigger purchase, you’ll know where you stand. 

Written on April 29, 2015

Self Lender is a venture-backed startup that helps people build credit and savings. Comments? Questions? Send us a note at hello@selflender.com.

Ready to join Self Lender?


comments powered by Disqus