While the economy is still trudging through an uphill recovery, there has never been a better time for you to take control of your finances.
Whether you’re currently out of work and trying to stay afloat or just looking to keep your good financial habits going during these times of uncertainty, there’s perhaps no more significant predictor of your financial potential than your three-digit credit score.
Here’s a look at some credit score best practices to follow during these times:
Keep Your Credit Utilization Ratio in Check
For the best credit score, experts suggest keeping your credit utilization ratio – or your credit-to-debt ratio – at or below 30 percent on revolving debt. For example, if you have one credit card with a credit limit of $10,000, you’d want to accrue no more than $3,000 or else your credit score will likely decrease. For two credit cards with a total limit of $20,000, you’ll want to keep your balance at or below $6,000.
Consider Opening Up a New Credit Card/Ask to Increase Your Credit Limit
Is your credit utilization ratio currently exceeding the suggested 30 percent? If so, and if you don’t currently have the means to get the balance below that 30 percent number, there are a few creative means you can take to make this happen. One, you could open up a new credit card and then use it sparingly or not at all. When you open up a new credit card, you’re also increasing your total credit limit, so as long as you stay disciplined with your spending, your overall utilization ratio will decrease. The other thing you can do is contact your credit card company and ask if they can increase your limit. Again, so long as you stay disciplined with your spending, this could positively impact your credit score.
Check Your Report
It’s estimated that up to 20 percent of all Americans have some sort of an error on their credit report – and any erroneous details included on your credit report can have a significant impact on your credit score. It’s why we suggest pulling and checking your credit report at least once a year so you can dispute any errors faster. For the next year, however, the three major credit reporting bureaus are allowing Americans to pull their credit reports for free as often as they would like. Make sure you use this to your advantage.
Freeze Your Credit
Finally, it’s worth noting that fraud has spiked during this pandemic as hackers attempt to prey on vulnerable Americans. If you think any of your confidential information may have been compromised, we strongly encourage you to act quickly. One thing you can do is contact the credit reporting bureaus to freeze your credit. This will ensure that nobody other than you can open up a new line of credit. The only caveat is that when you do need to apply for a new line of credit, you’ll have to contact the credit reporting bureaus and have them un-freeze it to proceed. But it’s a safekeeping tactic that can be more than worth it, especially in times of heightened fraudulent activity.