There’s little doubt that Americans with higher credit scores get better deals on core consumer items like mortgages, auto loans and credit cards.
In many cases, you might be getting those “good credit” benefits without even knowing it. In the credit management game, experts calls that “accidental improvement” of your credit – and yes, there’s nothing wrong with benefiting from financial moves you’re unaware of, as long as you learn how to turn “accidental” into “intentional” eventually.
Part of the problem is it can sometimes be difficult to understand exactly what goes into your credit report – and how that translates into a credit score.
Hence the often-accidental nature of consumers’ credit score management, sometimes to their benefit. Here are seven examples of unintentional financial moves consumers make that can boost their credit scores.
Keeping older credit cards active
You might not realize it, but maintaining older credit cards instead of canceling them works out to your credit benefit. Why? Because creditors love consumers who don’t appear to need credit. And keeping an old credit card active, but not using it, is a good example of that mindset.
You don’t apply for credit a lot
When you apply for credit and a lender reviews your credit report, you accrue an “inquiry.” If you rack up too many of these, many lenders will be wary of offering you a new line of credit. So by not applying for credit – and keeping your hard inquiries low – you’re boosting your own credit score.
You don’t use pre-approved credit cards
If you have a history of accepting pre-approved credit cards, your credit score might be lowered. Why? Every time you fill out the application for a card that’s “pre-approved,” the credit issuer will still pull your credit report. And that’s another inquiry.
You don’t accumulate high balances
If you don’t use your credit card that often, you probably don’t have a high balance on it. That helps boost your credit; even if you’re making minimum payments, carrying a high balance hurts your credit utilization ratio – and that’s 30 percent of your credit score. Keep a low balance – better yet, pay off your bills every month – and you’ll be helping your score.
You’re piggy-backing off a relative’s good credit
Credit scoring agencies are OK with you “piggybacking” off of your mom or dad’s good credit – or any family member’s good credit, for that matter. And if you’re added as the name on an account that’s been in good standing for a while, all that positive credit will be reflected on your report.
You’ve auto-scheduled your monthly bill payments
Maybe you’ve scheduled auto payments for monthly bills, like your car or mortgage loan, or a utility bill. That’s a big plus for your credit as well as your household budget – you won’t be missing payments, so your credit score will stay intact.
You check your credit report regularly
By reviewing your credit score once or twice a year, you’re helping your credit health. That’s because a good review of your recent credit history can show mistakes and errors that are hurting your score – and by fixing these, you’ll boost your score. Visit CreditRepair.com for a free copy of your TransUnion credit report and score. If you notice inaccuracies on your report, the credit repair services can help you get back on track.
Brian O’Connell is a personal finance columnist for GOBankingRates.com.