How to Do a Better Job at Managing Credit Scores

Written by , May 15, 2012

How to Do a Better Job at Managing Credit ScoresPerhaps more than any other single number, your credit score has a significant impact on your financial health. With a better credit score you’ll be able to pay a lower interest rate on your credit cards, car loan and home mortgage loan. On the other hand, if your credit score is too low you might not be able to get certain types of loans at all. It’s therefore vitally important that you manage your credit score and keep your number high.

In order to do a better job of managing your credit score, you’ll need to be proactive. If you only react when bad things happen, you’ll end up spending a lot more time and effort to repair the damage, all the while suffering the negative effects of the lower score.

Here’s some credit card advice to help you proactively manage your credit score.

  • Review Your Credit Report Annually. You might already know that you can request a free credit report each year from three of the major credit bureaus (Equifax, TransUnion, and Experian), and that you can always get additional copies more frequently than that if you’re willing to pay for them. If you’ve already made a habit of requesting your reports each year, that’s a good start. But it’s essential that you take the next step; actually reviewing each report. Don’t assume that because you’ve reviewed a report from one of the agencies you’ve learned everything you need to know. The various credit bureaus often have different (and sometimes conflicting) information, so it’s important to review them all.
  • Set Up Fraud Alerts. While periodically reviewing your credit reports is important, it’s also important that you find out as soon as possible whenever things happen that will negatively impact your credit score. If you ever believe that your credit card or any other personal financial information (such as your Social Security Number) has been compromised, you can set up a fraud alert with the credit bureaus. With a fraud alert in place, each time someone tries to open a new account in your name, the lender or department store should personally contact you to verify that the request is appropriate. This should make it difficult for an identity thief to run up debt in your name and damage your credit score.
  • Set Up Banking Notifications. Many credit card companies and financial institutions offer the ability to receive notifications (generally either by email or SMS text message) each time there is a change made to your account. Because a compromised checking account often goes hand-in-hand with compromised credit card accounts or identity theft, learning about unauthorized checking account access immediately after it happens can be important information.
  • Don’t Open Too Many New Credit Lines. Many department and discount stores have recently placed a renewed emphasis on a tried and true promotional technique – offering discounts on a purchase you’re making if you sign up for a store credit card. Opening too many new accounts in too short a time period often damages your credit score, so think twice about getting a new store credit card just to save $5 or $10 on one day’s purchase.
  • Finally, don’t forget that the foundation for managing your credit score is to make sound financial decisions. Pay down your credit card balances and keep them low. Don’t live beyond your means. These basic guidelines, together with the steps outlined above, will help you keep your score as high as possible.

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