December 1, 2023

Maintaining a Good Credit Score

Building and maintaining a good credit score is an important part of growing and preserving your wealth over the long term. You’ll enjoy a lower interest rate and better terms on your loans if you have a strong credit history and high credit score, which can save you thousands of dollars in interest charges over time.
Here are a few key steps that you can take to maintain a good credit score:
•Pay your bills on time. One of the most important factors that affects your credit score is your payment history. To maintain a good credit score, you should make sure to pay your bills on time, every time. Late payments, even if they’re only a few days late, can have a significant negative impact on your credit score.
•Keep your credit utilization low. Your credit utilization, or the amount of credit you’re using compared to the amount you have available, is another important factor that affects your credit score. To maintain a good credit score, you should aim to keep your credit utilization below 30% of your available credit.
•Monitor your credit report. It’s a good idea to check your credit report regularly to make sure that all the information is accurate and up to date. Today, there are several services that will provide you with a credit report free of charge. Errors on your credit report can negatively impact your credit score, so it’s important to dispute any inaccuracies you find.
•Avoid opening too many new accounts. Every time you apply for credit, it can have a small negative impact on your credit score. To maintain a good credit score, you should avoid opening too many new accounts in a short period of time. Note, however, that if you do not use credit cards or don’t have enough credit lines open, you may fall victim to not having a sufficient credit history. So, open some credit cards and take out some loans, but do not overdo it.
By following these steps and practicing good credit habits, you can maintain a good credit score and maximize your borrowing power over the long term.
Frequently Asked Questions
Should I pay off debt or invest?
If you have high-interest debt, such as many credit card charges, it usually makes sense to pay it off before you invest. Few investments ever pay as much as credit cards charge. Once you’ve paid off your debt, redirect that extra money to savings and investments. And try to pay your credit card balance in full each month, whenever possible, to avoid owing interest in the future.
How much money do I need to buy a mutual fund?
Mutual fund companies have different minimum initial investment requirements to get started, often beginning at about 500. After that, you can usually invest less. Some mutual funds will waive their initial minimums if you commit to investing a regular sum each month. You can also buy mutual fund and exchange-traded fund (ETF) shares through a brokerage firm, some of which charge nothing for opening an account.
What is an exchange-traded fund (ETF)?
Exchange-traded funds (ETFs) are investment pools much like mutual funds. A key difference is that their shares are traded on stock exchanges (rather than bought and sold through a particular fund company). They sometimes charge lower fees as well. You can also buy them, along with stocks and bonds, through a brokerage firm.
Types of Investments
Investments vary in terms of risk and potential return. As a general rule, the safer they are, the lower their potential return, and vice versa.
If you aren’t already familiar with the various types of investments, it’s worth spending a little time reading up on them. While there are all kinds of exotic investments, most people will want to start with the basics: stocks, bonds, and mutual funds.
•Stocks are shares of ownership in a corporation. When you buy stock, you own a tiny slice of that company and will benefit from any rise in its share price, as well as any dividends that it pays out. Stocks are generally seen as riskier than bonds, but stocks can also vary widely in risk from one corporation to another.
•Bonds are like IOUs from a company or government. When you buy a bond, the issuer promises to pay your money back, with interest, after a certain period. As a very general rule, bonds are considered less risky than stocks, but with less potential upside. At the same time, some bonds are riskier than others; bond-rating agencies assign them letter grades to reflect that.
•Mutual funds are pools of securities, often stocks, bonds, or a combination of the two. When you buy mutual fund shares, you get a slice of the entire pool. Mutual funds also vary in risk, depending on what they invest in.
•Also, exchange-traded funds (ETFs) are like mutual funds in that each share holds an entire portfolio of securities, but ETFs are listed on exchanges and trade like stocks. There are ETFs that track major stock indexes like the S&P 500, particular industry sectors, or asset classes like bonds and real estate.

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