A healthy credit rating makes your financial life much simpler than an unhealthy one, as it gives you all the benefits which come through having proved that you are financially responsible. Once you have a healthy credit rating you will be able to obtain mortgages and loans at preferential interest rates, have access to more credit if you need it, and lower insurance premiums. Thus once you have a healthy credit rating you want to ensure you keep it. It is much easier to let your score fall than it is to build it up.
Having a good credit rating may make you an easy target for family members who are unable to obtain their own loans without a responsible co-signer to endorse a loan for them. This is one thing you need to be particularly wary of as it can have an impact on your own credit score. Firstly it will reduce your own level of debt to credit ratio, as the loan will be looked upon as part of your total liabilities. You will be considered equally responsible for payments on the loan as the guarantor, so if your friend or relative defaults then the debt collectors will come after you for payments and you may find your own perfect financial record dragged through the mud resulting in your credit score plummeting.
Instead ask yourself why the person is unable to obtain a loan in their own right. It may well boil down to their financial irresponsibility in past dealings, and a low credit score. A very high percentage of endorsed loans end up being paid for by the guarantor, so be extremely cautious before ever endorsing a loan for a third party, though there may be exceptional circumstances such as your beloved off springs student loan. It helps if you raise them to be financially responsible too.
The most obvious way of keeping your credit rating healthy is to ensure that all payments on everything are paid on time, and this can be organized best by paying everything on automated debit.
Remember to always keep your debt to credit ratio low by only using up to a certain percentage of available credit on any one card. 30% is the maximum recommended amount to put onto a credit card, whilst using all the available credit is likely to set alarm bells off, even if you pay off the balance in full. Carrying a balance and paying off only the minimum is not actually detrimental to your credit rating, as long as it is within the acceptable 30% range. However, by doing so, you will end up paying unnecessary interest.
Although it can raise alarms to lenders if you start making multiple applications for credit cards or store cards, and will probably cause your score to drop, you won’t have the same problems when it comes to checking out mortgages. Multiple enquires to mortgage lenders are treated as a single application and a prudent move.
Finally if you become fed up of the weight of all your plastic, be careful which ones you choose to discard. Keep the oldest line of credit open and use it from time to time, as this represents the length of your credit history which is considered in your overall score. It also reflects better on you to hold named bank credit cards of repute, rather than some dodgy card which you obtained for a one off free gift of something long since discarded.
Keeping an already healthy credit rating in peak condition isn’t hard to do if you follow these guidelines. A prudent borrower is rewarded with financial perks which are worth hanging on to, so keeps an eye on your rating once a year through obtaining your free credit report just to ensure that all is still well.