Tips For Improving Your Credit Score
Your credit score is important when you decide to purchase a home or any significant purchase that requires loans or payments over a period. Your credit score measures how reliable you are in paying back a loan or making payments in general.
The most impactful thing you can do to build creditworthiness is to make payments on time. This history accounts for 35% of your credit score. Ways to help you accomplish this is to set up autopay on your recurring expenses and create calendars to track when those payments are due. You can also have the platforms through which you make payments send you reminders as you approach the due date.
Next, it is important to pay off revolving credit card balances. Focus on the balances that are higher first, making them a priority to pay off. If you are continually paying off your balance in full, but still have a high utilization rate, consider paying the balance before the monthly statement date. This will help keep your balance lower throughout the month.
The length of your credit history is another important factor that impacts your overall score. Consider keeping your old credit cards open and even using them and paying them off every now and then. Keeping these older cards active will benefit your score because your credit history won’t be erased.
Diversifying the types of credit you have also impacts your credit score. Having a mix of an auto loan and a mortgage loan, rather than one type, will have a stronger credit mix. This is something that will grow over time as you apply for new credit accounts as you need them. It is important to remember to not try too hard to take on more debt than is necessary when starting to build credit.
Applying for multiple credit accounts at one time can negatively impact your credit score. A lender will run a hard inquiry each time you apply for one, knocking points off your credit score. Strategize to only apply when you need to, and to focus on spacing out those inquiries. You can also see if a lender offers prequalification. This is when they review your ability to be applying for this loan and will keep the inquiry from impacting your credit score.
Inaccurate or fraudulent information on your credit report can be detrimental to your score. If this happens to you, you can dispute it with credit reporting agencies, who will investigate the situation. This is a good way to get any fraudulent activity removed from your account.
Becoming an authorized user on a loved one’s account can immediately impact your credit score. Of course, make sure that the user has a positive payment history and a relatively low credit utilization rate.
Building credit is not a hard thing to do. It just requires some knowledge and understanding of how your score is affected. Adopting these tips and strategies will improve your credit score, and contribute to a better financial future.
Matt’s Corner
