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There are three major habits that I practice to keep my credit score high, in the high 700’s to low 800’s, depending on which credit agency you check.
Check Credit History Regularly
The first habit is to regularly check my credit history to make sure nothing weird or incorrect is showing up, like a loan or a credit card that I don’t recognize. To check my credit score, I have a free account at Credit Karma, which I log into at least once a quarter. I recently took out a personal loan to cover the cost of a roof repair, so I checked my credit score when I applied for the loan to make sure the loan officer wouldn’t have a reason to decline my loan application.
Related post: Pay Off Auto Loan Or Roof Repair
Frequent Credit Card Payments
My second habit is to make frequent payments on my credit card, usually every week or so. I time it around my weekly payday so that I know I have incoming cash. Paying frequently makes it easier on my cash flow, keeps the credit card balance from getting too high, and allows me to regularly monitor my expenses and determine if I’m spending too much money.
Related Post: 9 Reasons Why I Pay My Credit Card Every Week
Pay Off Debt Early
My third, and probably most effective, habit is to pay off loans early, which I do by using three specific methods.
Firstly, I set up biweekly loan payments whenever possible so that I pay less in interest and pay an extra months payment.
Over time, that extra payment every year adds up. There are two loans, the mortgage and my hubby’s student loan, that for some reason does not allow automatic biweekly payments. But my other loans, my personal loan for a roof repair and my auto loan that I just recently paid off had no problem with biweekly payments.
Payments Larger Than The Minimum Payment
Secondly, most of my loan payments are larger than the minimum payment. It’s easy to do when you make automatic biweekly payments. Just pick an amount higher than half the minimum payment that the bank should deduct out of your bank account every two weeks, and voila, you’re paying more than the minimum payment.
Large Final Payment
Lastly, I pay off the entire remaining loan balance when I reach a point in the loan where doing so won’t cause much disturbance in my cash flow. Most recently, I paid off the remaining $1800 on my auto loan a few weeks ago so that I wouldn’t have any payments during my upcoming maternity leave.
In addition to these three main habits, I’ve noticed that when I carry a credit card balance that is larger than normal for more than a month, my credit score tends to dip a little. It’s probably because my credit card utilization increases during that time, which can affect your credit score.
Why did I have to check my credit score at Credit Karma this past weekend? I discovered that my credit score went down by 41 points, from 828 to 787, because I put a medical bill of $780.00 on my credit card in November.
This credit card has a limit of $1,500.00, which raised the utlization rate for that card to almost 60% ($888/$1,500) Forget that my total credit card limit across all my credit cards is $26,800.00, making my total credit card utilization rate around 3%. Forget that I make weekly payments on this credit card, the only card that I use, thus averaging a monthly balance of $300.00. I only used the credit card to pay the bill so that I could collect the points, which I’ll use to get free stuff with.
I checked it to make sure my credit score is as expected, since medical bills are one of the most common reasons people have credit problems. I had a medical emergency last month that included an overnight stay at the hospital, and I’ve been waiting for all the bills to arrive before I start making calls to negotiate them down. I’m going to negotiate, Sterling Archer style.
By the way, I actually really like Credit Karma.