Think about your credit score and the advice you receive from friends, a family member or anyone else (including a financial planner) about that score and how to protect it.
You may think that protecting a credit score simply means making sure you pay relatively the date due and having debt is just a part of everyday life.
But destroying your credit score is a reality that most ignore, and they don’t follow simple rules to keep that three digit number on the straight and narrow.
And we all know what a poor credit score means in the grand scheme of things as it relates to money: you won’t be able to get it, nor are you going to be able to get a credit card, borrow money or get a car or house with much ease.
Don’t forget as well that a bad credit score also means your interest rate if you are able to get a loan is going to be heavy, to say the least, and you’ll end up spending more in interest than you on the principle, and that’s a place no one wants to be.
To keep your credit score in line, you want to focus on two elements: paying on time and keeping your credit levels at a reasonable level (i.e. not maxing out your credit card). Maxing out a credit card is a huge credit score red flag as creditors see a $5,000 credit limit and the balance sits at about that or maybe only a few dollars less. This is called a bad credit utilization rate, and creditors see it and assume that you aren’t going to be able to accept any more credit, certainly not from the reputable ones anyway.
Paying on time might be the easiest yet the most difficult element to control for the general public to get right when it comes to their debt. Late credit card payments not only carry with them a late fee, but carry quite the relevancy when it comes to your score: something in the neighborhood of 35 percent. You want to stay as close to that payment date as possible but certainly not past it, and if you manage to go past 30 days, you run the risk of having that reported to a credit agency and thus turn it over to collections. That, in itself, is worth about 100 points of a drop to your score.
Keep that score alive and kicking by doing not much more than pay attention to paying on time and reminding yourself that the money on those credit cards needs paid back, so keep it minimal at best to maximize your score.