Depending on where you stand, consistency can either be a really good thing, or especially bad.
In sports, most athletes think consistency is a key element in top performers. For writers and other creative types, not so much. After all, it was Oscar Wilde who once said, “Consistency is the last refuge of the unimaginative.”
It would appear Mr. Wilde may have applied that same philosophy to managing his finances as he died young and penniless after a hugely successful writing career. Yes, consistency may be considered a tad boring, but when it comes to your credit it really does pay.
Why? Because in the credit world, consistency equals stability and stability represents a good credit risk.
For example, a person who has five different addresses in six years would appear to have a problem paying rent. Conversely, someone who shows only one address clearly demonstrates responsible behavior.
The same could be said for your job history. If you’ve held a succession of different jobs over the years, perhaps moving every year into a new position, this could signal instability. If there is inconstancy in one aspect of your life, chances are it will raise its nasty head in others. And, the last thing you want, especially if you’re in the market for a student loan, car, home, or credit card (all life-events that trigger companies pulling your credit report), is inconsistency damaging your credit score.
Improving Your Credit Score
So, what are the steps you can take to improve your credit score if it’s being affected by inconsistent or other negative, credit-related behaviors in your past? Here are some we recommend:
1. Review your credit history. By law, you are allowed to pull one free copy of your credit report every year from each of the top three credit reporting agencies (CRAs): Equifax, Experian and TransUnion. Examine it regularly and closely closely for errors. If you find any, dispute them. It can be time consuming, so if you don’t want to go it alone, partner with a reputable company – preferably one that doesn’t charge monthly fees.
2. Stop spending! Many people fall prey to overspending when it comes to credit cards, and it isn’t until the bills come due that they realize they’ve dug themselves a deep hole. People who have good credit scores have a credit utilization ratio (how much of your available credit you use each month) under 30 – 40%. To curb spending, create a budget and stick to it with consistency.
3. Pay off existing debt. Are you rolling over your credit charges every month? If you are, stop! A sure fire way to increase your score is to methodically pay off your balances (especially if you have them on multiple cards) and then select only one or two cards to use. However, don’t close out those cards you decide not to use. Doing so can lower your score.
4. Pay on time. Ahh, consistency. If you have a long history of paying off your balances whenever they’re due you’ll be rewarded with a high credit score. By creating a budget, you’ll know how much you can reasonably spend and pay off each month.
5. Not all debt is bad. Don’t try and get that car loan you paid off last year taken off your credit report. It demonstrates that you are a good credit risk and shows lenders you are responsible about paying back what you owe.
6. Avoid applying for new credit. “Hard” inquiries (those generated because you have applied for new lines of credit) can bring down your score. Too many can indicate you are taking on too much debt, or that you may be in some sort of financial trouble and are looking at credit as a way to get out of it.
Above all, be patient. If your credit score is low, odds are it took some time to get it there. Focus on dependably paying off existing debt, getting that budget created and sticking with it, and only buying what you need as opposed to want.
By consistently following these goals, you’ll be writing a whole new chapter in your credit history.