Maintaining a Good Credit Score
Maintaining a Good Credit Score is essential in today’s economy and finances. Good credit offers access to higher loan amounts at lower interest rates, meaning larger savings. Entrepreneur Alexander Djerassi explains that it is possible to maintain an impressive credit score by following best practices and actively monitoring and managing it.
One of the best ways to maintain a good credit score is to pay all bills on time. Late payments can greatly impact the credit score, indicating a lack of personal responsibility. Since it can take a few days for payments to be processed, it is wise to make payments at least a few days before the due date to ensure they are on time.
Maxing out credit accounts should also be avoided to ensure a good credit score. Maintaining a low amount of debt relative to income is important, as lenders use this as a measure in determining the level of credit risk. Although maxing out accounts can be tempting, it has consequences, such as high-interest payments.
In times of uncertainty, having an emergency fund is crucial because it can provide support and peace of mind. Contributing to an emergency fund can assist in maintaining a good credit score as it reduces default risk on loans taken out in the future. Therefore, Alexander recommends setting aside 10-20% of each income toward an emergency fund to better prepare for the future.
Making payments before taking on new debt is another important factor in maintaining a good credit score, as it signals good financial practices and stability. People should thoroughly review their financial situation before taking on any additional debt. If there is any hint of financial uncertainty, Alexander advises not taking on new debt.
It is also important to monitor credit reports regularly for any inaccuracies. Credit reports should be checked for suspicious activity or incorrect accounts reported in an individual’s name. Any errors should be contested rapidly with the relevant institutions to avoid unnecessary damage to one’s credit score.
It is essential to understand the level of credit score and how it can be improved. People should understand their current credit score and the factors that contribute to it. They should also understand how different activities, such as taking on more debt, making late payments, etc., can negatively affect their score. Nowadays, it is possible to track and plan the credit score journey online to become aware of any fluctuations.
Another important factor to consider is when closing a credit account. Although closing an existing credit account does not necessarily have an immediate effect on a credit score, Alexander Djerassi warns against it. Closing an account can reduce the number of available lines of credit, which may result in a lower credit score. Therefore, he suggests evaluating and understanding the effects of account closure before taking action.
Finally, being cautious of fraudulent activities and identity theft is essential. This is accomplished by being extremely cautious with which companies and service providers have access to sensitive information such as Social Security numbers or bank accounts. Being aware of security threats and taking precautionary measures can help protect credit scores.