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A strong credit score is important for obtaining favorable loan terms, credit cards, and other financial products. Maintaining a good credit score requires following certain basic rules consistently.
Pay Bills on Time
Consistently paying bills by their due date is one of the most significant factors affecting your credit score. Late payments can stay on your credit report for up to seven years and negatively impact your score.
Keep Credit Utilization Low
Credit utilization refers to the percentage of your available credit that you are using. It is recommended to keep this ratio below 30%. High utilization can signal financial distress and lower your credit score.
Maintain a Mix of Credit Types
Having different types of credit, such as credit cards, loans, and mortgages, can positively influence your credit score. However, avoid opening unnecessary accounts just to diversify your credit profile.
Limit New Credit Applications
Applying for multiple new credit accounts in a short period can lower your score. Each application results in a hard inquiry, which can stay on your report for up to two years.
Regularly Check Your Credit Report
Review your credit report periodically to identify and dispute any errors or fraudulent activity. You are entitled to a free report from each of the three major credit bureaus annually.