How to Protect Your Credit Score?

Last Revised on November 18, 2010

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Your credit score is probably the most important thing besides employment when it comes to your financial health. Unless you are super rich, you will eventually need to borrow some money for reasons such as home mortgage, school loans or auto financing; your eligibility as well as the interest rate at which the lenders will give you loans will depend upon your credit score. That’s why it is so crucial to maintain a good credit score and don’t let it fall down; here are things you could do.

Best Tips For Protecting Your Credit Score

Safeguard your identity. This is one of the most important factor that even the financial experts forget to recommend to their clients when dealing with maintaining an already achieved good or great credit score. If somebody steals your identity and use it to make purchases beyond the limit of an amount of money that you can easily pay off, you are in trouble. Most identity thefts are done by stealing people’s social security number, date of  birth and driver’s license id. Protect your identity from fraudulent activities first while trying to build a good credit history. Shed mails and papers with your information on them, and never share your personal information with anybody including the companies you are not 100% sure about.

Know your limits. We can’t emphasize enough how much of a role your spending habits play throughout your credit score rating process. Whether you are a teenager who is just starting out to borrow student loans, an adult trying to get a newly purchased car financed or a couple buying their first home mortgage. Best thing is to know your potential for paying back on time, which is based on how much money you earn and how much of them goes in monthly bills. That way you are protecting yourself from falling into debts with high interest rates that become harder to get rid if you become late behind their due dates.

Pay your bills on time. It doesn’t matter if you have an excellent credit score or an extremely low rating right now. It could change in a matter of few weeks or months depending upon your behavior of paying bills routine. If you make payments late, your score will decrease. To protect it, make all the payments before approaching any due dates. If you have many accounts to be repaid, pay each of them the minimum amount first and then any extra money that you can afford; that way you would be protected from falling behind schedule for repayments of one or two loans. Review each one of your monthly statements carefully. Set up automatic payments if you don’t live paycheck to paycheck (don’t overdraft though) and have a steady income.

Don’t let bills go to collection agency. These agencies are notorious for reporting your debts to credit bureaus so fast that before you even realize your balances are forward it to these agencies, they have already reported to these bureaus. Any unpaid bills and financial disputes should be settled with your original creditor; so that you and that party can work something work and your credit score remains intact and protected.

Don’t max out your credit cards. This is the most important thing since your credit utilization is 30% of your credit score calculation. The store and credit card companies notifies you about the maximum amount of money you can spend on those cards; try not to use the maximum amount allowed. The more nearer you are to the utilization limits, worse your credit score will become. To maintain a good credit standing candidate, stay below 7% of the allowed limits and have plenty of open credit lines which is what the top FICO scorers use.

Stay away from any more store cards. Whether it’s the BestBuy, Target, Kohls, JC Penny or Macy’s, all these retailers offer store cards. Most of them offer anywhere between 5% to 10% on any purchases you make in their stores. But what they don’t offer is low or free interest rates nor do they clearly disclose them at the time of signing up; often the rate is as high as 30%. Terrible. Ok, and if you do already have one of these and kind get rid of them certain reason, avoid payment skipping options at all cost possible since the interests you will be raking on them will end up costing you too much and credit score remains at risk.

Be wary about co-signing any loans. How many people gets lured into co-signing a loan for some family member and friends are incredible. On the one hand, we want to help our networks but at the same time we have to protect our own credit score. Often time there is a reason why they need a co-singer to start with, unless they are teenagers and not adults. By cosigning, you are pretty much taking the responsibility of paying off the debts. However, I do believe if you are married it is important that you sit down and have a talk with your spouse. Marriage supposed to be long lasting, and if you are sure yours will be one then both husband and wife can cosign with no doubt in their mind.

Sign up for alerts and review your records. Hard to believe, but free credit score reports do exists. Everybody can get their annual credit score reporting. To protect yourself more, sign up for credit monitoring services that sends you alerts whenever your credit score is affected for any reason. These ways will help ensure you know your credit score well and any inconsistencies can be disputed early on when noticed.

On a side note, filing a bankruptcy and house foreclosure proceedings doesn’t protect your credit score; in fact these two are worse things anyone can do to get their scores negatively affected.

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