5 Ways to Successfully Protect Your Credit Score
Finances are in many ways a game: There are scores that are recorded along with advances, retreats, victories that come with benefits and losses that come with consequences. It may be a somewhat inane way to look at such an important aspect of life, but doing so may help you decide that you have to play the game wisely to stay ahead. That means that sometimes, you need to play defense, which specifically means you will need to do what you can to protect your credit score to avoid those retreats and losses.
There are countless articles and sources of information out there that tell you how to boost your credit score, but all of those resources assume that your finances are either relatively stable or improving. That’s not the case for everyone, which is why Wade Torkelson would like to help you understand strategies to help you protect your credit score during those times when money is tight and stress runs high. Below are 5 strategies that will hopefully help you protect your credit score until you reach calmer financial waters.
1. Do What You Can To Pay Even the Minimum
When money is scarce, it often leads people to decide between two or more seemingly bad choices and choosing the one that’s “less or least” bad. One example of this involves whether or not to make a minimum monthly credit card payment. Many times, it makes no real difference in terms of paying down a debt and in some cases the principal of the debt continues to rise.
So what should you do? Save that money for some other bill/bills or make that minimum payment? According to this study, an enormous percentage of American credit card holders face this difficult choice. The answer in the majority of situations is to make that minimum payment to at least keep that account current. Not making a payment can lead to a negative entry on your credit history, and that’s not doing the job when it comes to how to properly protect your credit score.
2. Be Proactive
For some people who are struggling, even making minimum payments by the due date may be all but impossible. After all, if you’re forced between putting food on the table for your family or paying your credit card bill without any other options, you’re going to do what’s best for those who depend on you. Once again, reality trumps “just do this and all will be well” when “this” isn’t possible.
If you’re staring down the barrel of this situation, be proactive and contact the creditor or creditors whose payments you’re going to be forced to miss. Explain your situation and find out how late your account has to be before the delinquency shows up on your credit history. Some accounts will not report the situation until an account is 30 days past due, while others will wait 45 days. Regardless of what it is, protect your credit score by finding that out and telling your lender when you’ll be able to make that next payment.
3. Negotiate With Your Creditor/Creditors
For those who face very difficult circumstances, there are still options that will help you protect your credit score. One of those is to simply engage in good-faith negotiations with the lender or lenders who are holding your debt. As mentioned above, simply reaching out to them will make a positive difference and could at the very least keep bill collectors from hounding you and adding a mountain of stress to an already stressful situation.
When you figure out what you can afford to pay on a monthly basis for the time being, offer that amount to your creditors. They may not accept, but at this point you have little to lose by asking. In addition, you should ask if they can avoid reporting the debt to credit reporting agencies as long as you’re making your agreed-upon payments. Once again, they may not agree to this idea, but you’ll never know unless you make the request.
4. Don’t Close Your Accounts
A common idea when people do reach an agreement with creditors is to close their accounts once they are paid off so that they are never tempted to use them again. While this is certainly one approach to avoiding new debt, it’s the opposite of what should be done in most situations if your priority is to protect your credit score.
One of the variables used in calculating your credit score is available credit. If you close accounts, your available credit will go down and that could affect your score. If you’re worried about using a credit card, for instance, cut it up and protect yourself from a mistake that way, as that available credit could be very helpful if you ever apply for any type of financing in the future.
5. Dispute Incorrect Entries
Finally, a painstaking but extremely necessary way to protect your credit score is to make sure that you review your credit report regularly. That’s because it’s far from uncommon for a credit report to contain errors. Consumer Reports found in a recent study that more than one-third of people surveyed found credit reporting errors in their files. Mistakes on your credit report can be costly.
If you want to protect your credit score, you need to review that information regularly and dispute anything that you find that’s inaccurate. Many disputes lead to inaccurate information being removed, and that’s obviously going to prevent your score from being negatively affected.
If you’d like to learn more about how to protect your credit score or about other financial strategies, feel free to subscribe to our newsletter to receive information from Wade Torkelson that’s going to help you move forward in this regard.
