Your credit score matters. If it’s higher, it will be easier for you to do things like take out loans or get leases on apartments. One that needs work might limit these options a little.
You can easily monitor your credit score to make sure that it stays in the range where you want it. While you’re at it, you should watch out for factors that can cause it to plummet suddenly. We’ll talk about three of them right now.
1. Closing Credit Cards
You probably know that you don’t want to have too many credit cards. Two or three is probably the ideal number for most people. If you have more than that, and you owe money on all of them, you may want to look into the pros and cons of debt consolidation to clear your debts.
Closing credit card accounts may seem prudent if you have too many. However, your credit score will probably take a hit if you do. Closing an account impacts your credit utilization ratio, which is how much of your available credit you are using.
This ratio is a significant part of your FICO score. If you lower your ratio, that means you’re using less of your available credit and your score will be higher.
Closing a credit card will decrease how much available credit you have. That will raise your credit utilization ratio and hurt your overall credit score. It can be better to keep a credit card open, even if you rarely use it, instead of closing it out. Just use it occasionally, so the company does not close it for you due to inactivity.
2. Gym Membership Contracts
It surprises some people when their credit score takes a hit because of a gym membership contract. This could happen if you don’t properly close the account.
Maybe you feel like you’re not going to the gym anymore, so it’s not worth it for you to retain the membership. That’s fine, but you need to avoid early termination penalties, which can negatively impact your credit score.
Look at the fine print. If there’s a way to close the account early without incurring any early termination fees, go ahead and do it. Otherwise, keep paying until the contract is over. While you might prefer not to do that, it’s a way you can avoid a hit to your credit score.
3. Rent Payments
Paying your rent every month is something that can work wonders for your credit score, assuming you hand over the full amount on time, every time. That establishes you as a reliable tenant and makes it easier to get a new lease if you ever want to move on from the current one.
If you don’t pay your rent on time, though, your landlord might decide to refer you to a credit bureau for delinquency. That can cause your credit score to plunge rapidly.
If you know that you can’t pay your rent on time, try to meet with your landlord so you can talk about it. Maybe you can work out an alternate payment plan. Doing so will let them know you’re aware of the problem, and you’re not just ignoring your obligations.
Try to Keep Your Credit Score High
It might take some time and effort to build up a solid credit score, but it helps you in several ways once you have it. Pay your rent (and all your bills) on time, close out gym memberships and other contracts the right way, and try to avoid closing credit cards. Doing all of that should help keep your credit score in respectable shape.