Your credit score determines your eligibility for loans, and landlords and insurers may use it to determine whether or not to do business with you. The next question many will ask is, “How can I protect my credit score?”
Bills in, payments out
If you want to prevent your credit score from taking another hit, take care of your bills. Pay your bills in full when they arrive, though credit card payments can be managed by paying at least the minimum. If you are late paying your utilities, your insurance or your rent, it will be reported as a late payment to the credit bureaus. The solution is to get control of your money and pay your bills as soon as they arrive.
Get on a financial diet
Sometimes it feels like you have more month than you make money. The solution here is to get on a financial diet. Stop spending money without thinking about it. Don’t go out to eat. Don’t take trips with friends when you already have credit card debt. Stop shopping for entertainment.
Cancel subscriptions for loot boxes and food deliveries. Then be intentional with your spending. Pay for essentials like shelter, utilities, basic food and your debt payments. You can then split the rest of the money between spending on luxuries, paying down debt and saving for the future.
You can use secured credit cards to keep yourself from overspending, since you can’t go over their cash limit. This allows you to order things online or have a “card” to pay for little things but you can’t spend too much. Once you’ve been on the financial diet for a while, you can start researching unsecured credit cards with reasonable loan terms. The best cards will be those that don’t charge an insane interest rate, won’t hit you with hefty fees simply for holding it, and are widely accepted.
Conversely, you shouldn’t look for credit cards with low teaser rates on the hope that you’ll make progress on the debt before the new, high interest rate kicks in. Opening new cards and rolling over your debt hurts your credit score.
Clean up your credit report
One way to protect your credit is to review your credit report. Perhaps your low credit score is because you’re a victim of identity theft. Your score goes down if someone else is buying things without paying for them in your name. In other cases, there are errors on the credit report. For example, they may list a debt twice, hurting your debt to income ratio. Or they’ve accidentally listed a debt owed by your ex as your responsibility.
Protect yourself against identity theft
It is tragic that identity theft is such a problem that we have to take active steps to protect ourselves. We’ve already told you to check your credit report. Get in the habit of monitoring your FICO score and learning why it dipped if it ever does. Shred bank account statements and credit card offers. Better yet, opt out of mailed credit card offers.
Don’t provide financial information over the phone unless you’re certain who it is. Don’t access credit card or bank account information via unsecured apps or public wifi. File your taxes as soon as possible, and if there are issues, find out why. For example, identity thieves are sometimes filing tax returns under the victim’s name and making off with the tax refund.
A worsening credit score costs you money in higher interest rates, increases in your insurance premiums, and sometimes more. Take these steps to protect your credit score and minimize the chances you’ll be hit by collections, whether or not it is your fault.