Maintaining Good Credit as an Asset – Three Essential Tips

April 5, 2018
897 Views

A good line of credit is an important asset to have. As much as investments are important, you also need to make sure that you are in good credit standing if you want to have the best opportunities in the future. Strong credit can help you to secure a mortgage for your family home or an investment home, and good credit could even impact your future employment, which will have a direct impact on your ability to create and maintain wealth.

Strengthening your credit profile should be seen as a necessary part of maintaining your finances, and with these simple tips you can improve your credit and maintain good credit into the future.

1: Keep Your Credit Utilization to a Minimum

Credit utilization should ideally be 30% or lower. Most people don’t meet this guideline, but it is still important to get as close to it as possible.

Low credit utilization is important because it shows lenders that you are responsible with your money and your available credit, and it can result in a more positive credit score. The best way to keep utilization low is to stop spending unnecessarily, while also paying off loan and credit card balances as quickly as possible.

Think of credit as an asset to be held, rather than as something to rely on for purchases that you couldn’t otherwise afford.

2: Maintain Consistent Credit Usage Patterns

Inconsistent spending and payment patterns will be viewed negatively by credit assessors. It is important to keep your spending as consistent as possible, and your credit repayments should also be consistent. This consistency will reflect on your credit report and will be positively by any credit issuer that looks at your records. Suddenly making minimum payments or reducing your payment frequency will be a red flag for most credit assessors.

The only exception is when you pay off a balance early, or when you pay more than the minimum payment. Doing this will not negatively impact your report.

3: Good Credit, Keep Those Old Accounts Open

Good debt and the age of an account can have a positive influence on your credit score. When you have paid off a loan account or a credit card, keep the account open for as long as possible. Most credit companies will allow you to leave an account open indefinitely, which will help to improve your overall credit score. Keeping old accounts open but unutilized will also help your credit utilization ratio, and could make you more attractive to lenders in the future.

With good credit you will always have financial options, as well as a security net when you need it. Maintaining good credit can make all of the difference when you are investing in your first home, and keeping a low credit utilization ratio will mean that you are left with less debt in retirement, and an overall better financial situation.

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