A credit score can be thought of like a grade that’s given to your credit report. It helps lenders understand your ability to repay your debt, which helps them understand whether you are a good candidate for a loan. Basically, if you have a history of repaying your loans in a timely fashion, that generally means your credit score will be higher. And, a strong credit score gives you access to more borrowing options for the things you want and need, such as buying your dream home or small business expenditures, at the best possible interest rate or terms. In other words, a credit score is part of your financial power and it can be a valuable tool to help you achieve your future financial goals.

Heather Philp

There are many benefits to having good credit. In fact, lenders aren’t the only ones who look at your credit score. Insurance companies, landlords, utility providers and cell phone providers may check your credit score or credit history before they determine your financial qualification and eligibility. Here are five tips to help you build and maintain a healthy credit profile:

Know your credit score and monitor your credit reports regularly
Monitor your credit score monthly and review your credit reports at least once a year. Doing this can ensure you have the opportunity to catch any errors or fraud and correct them before they impact your credit score negatively. There are many ways you can monitor your credit score for free, including if you have a loan with Wells Fargo. And, remember, you shouldn’t have to pay to see your credit report, either.
Always pay your bills on time and pay no less than the minimum payment
Your payment history makes up approximately 35% of your credit score, so making timely payments is one of the biggest factors in building a good credit score. Be sure to prioritize and schedule your monthly payments on time on all your accounts.
Keep your credit balances low and avoid maxing out your credit cards

How much credit you have available is another critical factor, which makes up roughly 30% of your credit score. Financial experts recommend staying below 30% of your credit utilization ratio while still actively using your creditTo help keep your balance low and manageable, make sure you maintain a realistic budget and only spend what you can afford to repay in full each month. Consider setting balance alerts to help you stay on top of your spending.

Ensure your credit card fits your lifestyle

Using credit responsibly can be a great way to build and maintain a healthy credit score, but it’s important that the card fits your lifestyle and spending habits. This is particularly true today because many consumers’ spending and buying behaviors changed in response to the pandemic. Make sure your card is relevant to your lifestyle and can help you make the most of everyday spending. For example, visit wellsfargo.com to see various credit card options that fit your lifestyle, from the new Active Cash℠ Card, which offers 2% cash rewards on purchases without revolving categories or rewards caps, to the recently launched Reflect℠ Card that gives consumers an extended introductory APR when they make on-time payments.

Think before closing accounts and diversify your credit history

The length of your credit history accounts for 15% of your credit score and recent credit activities, such as opening or closing accounts, make up 10% of your score. Closing credit accounts may actually lower your available credit and hurt your credit score in the short term, so if you’re in the process of applying for a new card, consider keeping your existing accounts open to maintain the length of your credit history. The last 10% of your score is based on the types of credit you currently have. It can help your score to show that you have had experience handling several different kinds of credit accounts, such as installment loans and revolving credit accounts.

Building a healthy credit history is a financial journey that takes time and effort, but will most certainly payoff in the long term.

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WI Guest Author

This correspondent is a guest contributor to The Washington Informer.

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