How to Build and Maintain Your Credit Score

Credit is the ability to borrow money with the understanding you will repay in the future, often with interest. When you’re ready to make a big purchase, such as a buying home or car, strong credit is crucial for securing a loan. Your credit score is a numerical expression of your creditworthiness, which ranges from bad to excellent on a scale of 300 to 850. A good credit score can lower your interest rates and save you money in the long run.

Several occurrences can drop your credit score, including late or missed bill payments, identity theft and hard inquiries on your credit report. How can you stay on top of your credit and continue building your score?

Check Your Free Credit Report

Once a year, you can access your free credit report from TransUnion, Equifax and Experian online. You can also use a free app like Credit Karma to monitor your score throughout the year, without a negative impact on your credit.

Report Any Discrepancies

Monitor all your transactions, so any suspected errors can be reported and investigated right away. Derogatory marks on your credit report can have a big impact on your score, so it’s important to have these items removed – especially if it’s a mistake. In general, negative information can stay on your credit report for approximately seven years.

Pay Your Bills On Time

Payment history accounts for 35 percent of your FICO® Score. As such, it’s crucial to get current on any missed payments. To avoid future late payments, set up auto pay or put reminders in the calendar each month. Although it’s recommended to pay all balances in full, that’s not always possible for everyone. Have a plan to pay off existing debt, rather than continuing to add to the overall amount.

Keep Credit Utilization Low

No matter how many lines of credit you have taken out, financial experts advise using no more than 30 percent of your credit limit. Your credit utilization rate is calculated by dividing total debt by available credit. For instance, if you have $50,000 available credit, do not exceed $15,000 in credit debt.

Stay Vigilant Against Scams

Be suspicious of “too good to be true offers”, like promises to repair your credit for free. Unfortunately, many people fall victim to these types of scams, paying thousands of dollars for credit repair with nothing to show for it. Yet credit repair services cannot ask for upfront payment and are required by federal law to provide clients a detailed written contract.

Apply for a Secured Credit Card 

If you are new to credit or need to rebuild your score, consider opening a secured credit card. Unlike traditional cards, these require a security deposit upfront to reduce risk for the issuer. The security deposit is used as collateral in the event you stop making payments.

As long as the credit card issuer reports activity to the credit bureaus, paying your bill on time and managing the balance can help improve your credit score.

Ready to apply for a loan or open a credit card? Work with Ion Bank for a range of flexible options. To learn more, contact us today.