What to Avoid to Keep Good Credit

December 8th, 2016 by Katie Hardman
credit score

Most of these blog posts focus on how to recover from bad credit. But if there’s such a thing as bad credit, good credit also exists. When it comes to maintaining good credit, there are a few things to keep in mind or else your credit score may lower. Avoid these four things in order to keep a good credit score.

Co-signing on loans

Co-signing usually happens when one party has a lower credit score than the other, and it often happens between a parent and a child when the child has not built up a lot of credit in comparison to the parent. When co-signing a loan, Person A agrees to continue making payments should Person B stops repaying the loan; both parties are 100% responsible for making sure the loan is paid off. A best-case scenario involves co-signers who both are always on time with payments and pay in full. However, a worse-case scenario means one party falls through and defaults, causing the other to either repay the loan in full on their own or take the hit to their credit score.

Paying bills late

Most bill payments aren’t reported to credit bureaus for being paid on time; you won’t achieve “good credit” for being punctual. An overdue bill, however, can negatively affect your credit if the company you borrow from sends your bill to a debt collector. On top of that, late payments often result in a higher interest rate and an added late fee.

Accruing interest

Speaking of interest, accrued interest is the amount of loan interest that has already occurred but has not yet been paid off. People often forget about carrying high balances on credit cards and how that can impact interest rates, and your ability to quickly pay down this debt. Which brings us to the next point..

High credit card balances

Credit card balances can directly impact your credit score. Having a low credit balance shows that you can be responsible with your credit, but having a high balance may show the opposite and can cost you credit points. A good rule of thumb is to keep your balance at or below 30% of your credit limit. If your balance exceeds 30%, your credit score may end up decreasing.

Of course, there are many factors that go into calculating your credit score. It doesn’t rely solely on these four things, but these are good stepping stones in the right direction to keeping your credit score a good one.

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