If you have a good or excellent credit score, it's likely the result of years of responsible financial behavior and smart credit usage. There are tremendous advantages to having a high score, such as qualifying for the lowest interest rates and the best credit cards. You also have the ability to borrow money for practically whatever you need.
When you have good credit, it's very important to your overall financial health to protect it. Here are seven things you should be doing to make sure your great credit score stays that way.
1. Only apply for new credit when you need it
Applying for new credit affects two of the FICO score categories in a negative way. Ten percent of your score is made up of "new credit," which takes into account the number of times your credit was checked by lenders (inquiries), as well as how many of your accounts are new.
Another 15% of your score is made up of the length of your credit history. Among other things, this category takes into account the average age of your credit accounts, and the average drops when you add a new account into the mix.
2. Don't be a cosigner
Be very careful about cosigning a loan for someone else, even your spouse or kids. If they miss a payment or can no longer pay, it will show up on your credit report and can devastate your credit score.
As a general rule of thumb, don't cosign anything for anyone unless you are willing and able to take on the payment yourself if you have to.
3. Keep a list of your information
What would you do if your wallet got lost or stolen with all of your credit cards? Sure, you can try to look up all of your accounts online and find the contact information, but it may take a while, and many sites won't display your actual card number.
It's usually a good idea to keep a paper list of all of your card numbers, expiration dates, and contact phone numbers available. This way, if your cards are lost or stolen, you can cancel the accounts as quickly as possible. Just remember to keep the list in a safe place.
4. Maybe you should keep your "starter cards" open
Generally, "starter cards," or cards designed for people without a credit history, come with relatively high interest rates and fees, low limits, and don't offer much in the way of rewards. When your credit is built up, it can be very tempting to close them.
However, it may be a better idea to keep them open and simply not use them. I already mentioned that 15% of your score comes from the length of your credit history, so by keeping your oldest account open, you'll help this part of your score.
Also, a big part of your score is your credit card debt relative to your total available credit. By closing an account, you will reduce your total available credit and raise your utilization ratio, which can hurt your score.
5. Check your accounts, even if you don't use them
Speaking of credit cards you don't use, make sure you still check all your accounts every so often. Ensure there aren't charges like annual fees on there, and that no one is fraudulently using your card. Ruining your credit score because you didn't realize you owed an annual fee is a silly reason for your credit score to drop.
6. Be careful with your personal information
It goes without saying that you need to be very careful when giving out information like your Social Security number, birthdate, or your credit card numbers.
In addition, make sure you don't leave any paperwork with this information on it where a thief could potentially find it, including in your garbage. Investing in a paper shredder shouldn't cost more than $30 or so for a basic model, and it could save your identity from being stolen.
7. Keep an eye on it
Perhaps the best way to protect your credit is to watch it. You don't need to check it every day, but a credit monitoring service can be an excellent use of $20 or so per month.
In my opinion, the best one is through myFICO.com. However, any service that allows you to check your Equifax, Experian, and TransUnion credit reports is a good investment.
Checking your credit report once doesn't have to cost you a dime. Under Federal law, you're entitled to one free copy of your credit report from each credit bureau once per year. Go to annualcreditreport.com to request yours.
Easier now than later
All of this may sound like a lot of work, but it's much easier to protect your credit now than it is to recoup damages after someone steals your identity or makes a late payment on a loan you cosigned. With a little effort, you can make sure that the great credit score you've worked so hard to build stays great for years to come.