Your career in healthcare shows a high level of potential, commitment and achievement. Don’t you deserve a high credit score as well?
We talked about the importance of maintaining a high credit score with the chief lending officer at BHG, April Brissette. She explained that a credit score of 700-plus gives you the ability to borrow more in general, and even the power to negotiate with your lenders over interest rates and fees. “When your score is 800 or above,” she says,” it puts you in a position to take advantage of special loan categories.”
While your credit report is of interest to lenders, others that may request it include landlords, utilities, insurance companies and phone providers. In addition, potential employers may request your credit report as part of a job application or security authorization.
A high credit score involves more than just paying your bills on time, although that is no. 1 on Brissette’s list. As you can see in the infographic below, there are five components that make up your credit score. Payment history is the largest piece of the pie, making up more than a third of your overall score.
Here are 6 ways to keep your credit score high.
1. Pay your bills on time
This has the biggest impact on your credit score at 35 percent. As an added bonus, your credit limits will increase over time if you pay your bills when due and maintain the right level of revolving credit (see no. 3).
Tip: Enroll in automatic payments or ACH payments for all recurring debt. This ensures that payments are always made on time and reduces the hassle of paying your bills.
2. Subscribe to a service that gives you regular updates on your credit report
You will always be informed of inquiries, payment history or new activity. Most services offer an online dispute form, which is an easy way to get inaccurate items removed in a timely manner. This is also an excellent way to fight identity theft because you can tell the agency to get your permission before they pull a credit report on your account.
Tip: AnnualCreditReport.com gives you a truly free credit report once per year, with no recurring fees or costs. Many credit card companies offer regular credit score updates—you may want to check and see if yours is included.
3. Keep 50 percent to 70 percent of your credit limits available
Revolving credit availability makes up 30 percent of your credit score. Loan balances and level of debt are compared to your overall credit limit. “Once your balance is above 50 percent it will affect your credit score,” says Brissette.
For example, if you have a $10,000 credit limit on your card, you should keep your balance at $3,000 or less. At $5,000 it will affect your score. If you use personal credit cards for your business, this might keep your revolving credit too high. One solution is to make a weekly payment—it helps maintain cash flow and prevents the balance from reaching more than 50 percent of your credit limit.
Tip: Don’t wait until your credit card statement comes to pay the balance due. Make small payments throughout the month to maximize your cash flow.
4. Keep old credit cards open
Having 100 percent available on a card that you aren’t using will help improve your credit score. When you close an account, your credit availability is reduced and it affects the age of your account, which contributes 15 percent to your overall credit score.
Tip: Use the card once a year and pay it off when due. That way the credit grantor won’t close your account and the amount of credit available to you will benefit your credit score.
5. Limit opening new accounts
Inquiries make up 10 percent of your score and the age of your accounts make up another 15 percent. A new account or inquiry could drop your score significantly, especially when multiple new inquiries or accounts take place in a short period of time. “Only have credit checks when you need them,” says Brissette.
Tip: Consider going to your own bank for financing rather than using a dealership when purchasing a new vehicle.
6. Think twice before co-signing
If the main guarantor on a loan or credit card fails to make the payments on time, it will affect both the guarantor’s score and your score. After co-signing a loan you should monitor and be prepared to make the payments if they are missed or discontinued. Again, a credit service will notify you if there is a problem.
Tip: Ask the person for whom you’re considering co-signing to pull a free credit report, that way you can see what their existing credit history is like before making a decision.
Our savvy chief lending officer had another piece of advice for those healthcare professionals facing cash flow problems due to slow reimbursements and reduced payment amounts:
Get a business line of credit as early as possible—get it before you need it, that will help you through low cash flow periods.