How To Improve Your Credit Score
Your credit score can affect many areas of your life, from your ability to get a car loan or a mortgage to getting a new job or renting an apartment. It is worth your while to do what you can to raise your credit score if it is low. Here are some tips to help you raise your score.
Check Your Credit Report
The first thing you should do is check your credit report to see where you stand now. You can get a free credit check from each of the credit bureaus once a year. You should look at your FICO score and also check your report for any derogatory items. Also, if you see any mistakes in your report, you should dispute them right away.
Pay Down Your Credit Card Balances
If you carry high balances on your credit cards, this is hurting your credit score. If your balances are over 30% of your credit limit, you will definitely be dinged. So, your first step should be to pay all your balances down until they are below 30%. After that, keep paying them down because once your balances are below 10% of your credit limits, it will help your score even more. In the future, don’t run your balances up so high. For the best credit score, keep them below 10%.
Don’t go to the other extreme and not use your credit cards at all anymore. If you don’t use a card for a while, it could be closed for inactivity. The closure of a card will hurt your credit score because the FICO score takes into account how long your accounts have been open. Closing an older card will result in a lower average age of your accounts, lowering your credit score.
Always Pay on Time
Make sure that you pay all your bills on time every month, including your credit cards and any loan or mortgage payments. Your payment history is the biggest part of your credit score, so any late payments will really cause your score to plummet. If you can automate your bill payments, all the better. If not, set reminders on your calendar so that you don’t forget the payments.
Don’t Open Too Many New Accounts
Any time you apply for a new credit card or loan, a hard inquiry is reported on your credit file. Too many of these hard inquiries will lower your credit score. While you are trying to raise your credit score, don’t apply for any loan or credit unless you absolutely have to. If you need to apply for a car loan or a mortgage, keep all your applications within a short period of time so that they will be counted as only one inquiry.
It takes some patience and work to improve your credit score, but the results will be worth it. Once your credit score is lower, if you do need a loan, you will be able to get a better interest rate and save money on payments. You will have access to better deals on new credit cards and will not need to be afraid of not qualifying for an apartment or job.