Ways to Increase Your Credit Score
Your credit score is unique to you. It tells the tale of your financial decision making. Regardless of how little credit you have or the mistakes you may have made in the past, there are simple ways to help increase your credit score.
By building up your credit score you have more access to loans and can qualify for lower interest rates, or even skipping a utility deposit on your next apartment rental or home. While there’s no overnight fix for your credit score, there are many things you can do to increase your score so you can enjoy the benefits others are receiving.
When was the last time you saw your credit report? These days it is super easy to see your credit score and the exact amount of credit you have. Companies like Credit Karma make this a cinch. Just create an account and find out exactly where you stand. It is ok if it’s not pretty. Let’s look at how you can clean up that score.
- Look for errors on your report
It is very possible that your credit report has errors on it, and you shouldn’t be paying the price for that mistake. The Federal Trade Commission reports that up to 5% of consumers have an error on their credit report that is bad enough to result in you paying a higher price for a financial product. On top of that, roughly 1 in 4 reports have some type of error in general.If you find errors on your report, you should dispute them immediately. This means contacting the credit bureaus and going through their dispute process. You’ll need to be prepared, but know that disputing an error does not cost you anything. However, if there is an error that is not affecting your score, it is easier to just ignore it and not waste your time with it.
- Pay your debt down
Your credit score is based on your credit utilization – also known as how much of your credit limit you use. The more you use, the more your score can go down. Most experts will suggest keeping your credit utilization under 30%. If you have the funds to pay down a credit card, work on making larger payments to get that number down.Other ways to pay down your credit debts faster include:
- Using your credit card like a debit card. This means paying off your balance as soon as it’s posted.
- Ask for a credit limit increase. You can instantly lower your credit card utilization by raising your credit limit, but keeping the balance the same. Just make a call to your credit card company and ask if they can raise your limit without making a “hard” credit inquiry.
- Consider debt consolidation. This means combining all of your credit card debt onto a single credit card or a personal loan at a better interest rate.
- Deal with your past
The single biggest influence on your credit score is payment history. If you’ve made some not so intelligent choices in the past, that’s ok. You can fix your score and you can improve from where you are today. The most important step is owning your mistakes and working to fix them.Do you have unpaid bills? Call your creditor today and work to resolve those past due balances. You can even ask for them to rescind the reported delinquencies so they no longer appear on your report.
A missed payment can stay on your report for 7 years. That’s a long time. However, if you start up making payments again, it will look better to creditors to see a more recent payment history.
- Don’t open too many accounts at once and don’t close old cards
Your credit score is affected by “hard” inquiries and the length of your credit history. When you apply for credit cards or loans it will generate a “hard inquiry.” These will stay on your report for up to two years. If a lender sees too many of these inquiries, they may deny your application. Spread out your applications as much as possible.You also do not want to close out old accounts. While it seems tempting, closing out an old credit card can shorten your credit history overall. It can also lower you available total credit.
You want to do everything within your power to increase your credit score whenever possible. There are many benefits you can reap when keeping your score in good standing. Most of these fixes take time, but if you approach your credit score more proactively, you can increase your scores significantly.