Your credit score is a three-digit number that influences many important aspects of your life. It lets lenders know how likely it is that they’ll get paid back if they decide to provide you with a new credit card, an online loan, a loan for your student debt, a loan for your home. A healthy credit score is the most important factor of the financial aspect of your life.
The higher your credit score is, the easier it’ll be for you to apply and be approved for loans and new credit cards. How do you get a healthy credit score if your credit history isn’t ideal? Improving your credit score takes time, but if you address the issues that may be affecting your score, you’ll be able to quickly improve your credit score!
Interested in learning how to improve your credit score? Keep reading to learn how to build better credit now!
Start Paying Your Bills on Time
When a lender requests to take a look at your credit score, one of the biggest reasons they’re doing so is to learn how reliably you pay your bills. Why? Past payments are a great indicator of how often you’ll be paying future payments.
You can easily influence your credit score by paying off all of your bills on time every month. By paying any bills late (or not paying the agreed-upon amount) will hurt your credit score.
Get a list or calendar together to mark off when your bills are due. You’ll want to make sure that you’re paying off all of your bills off on time. Your credit card bills, any bills you have for loans, your phone bill, your rent, utilities, car insurance, etc. An easy way to do this is to add your accounts onto an automatic payment schedule, so that companies can automatically take the payment you out of your bank account without you having to remember.
If you happen to be behind on any payments, do your best to pay them off as soon as you possibly can. While missed and lay payments can hurt your credit history for up to seven years, the impact that they’ve had on your account will lessen over time.
Discover Your Credit Utilization
A credit utilization ratio is figured out by adding up all credit card debts and dividing it by the entire credit limit. If you charge about $1,000 to your credit cards every billing cycle and your entire credit limit (across all of your credit cards) is $5,000, that means that the credit utilization ratio is 20%.
Having a low credit utilization lets lenders know that you understand how to manage your credit cards. You can lower a credit utilization ratio by keeping your credit card balance low and paying off any debt.
Keep in mind that you don’t need a credit card balance to improve your credit history. By paying off your credit card debts every month, you’ll have a positive impact on your credit history.
In other words, you don’t need to build a balance on your credit score and only pay a portion of it off to increase your score. If you only spend $20 on your credit score for the month, pay that $20 off, and you’ll still boost your credit score!
There are three credit reporting bureaus that you should check your credit score on; Equifax, TransUnion, and Experian. Go through your credit history and see if there are any inaccuracies on your report.
Have you paid off a debt and that isn’t reported on your credit score? Are you seeing a loan that you didn’t apply for on your score? Dispute any inaccuracies that you see on your report, as inaccuracies on your credit report will drag your score down.
Don’t Apply to New Credit Too Often
While opening a new credit card on your account will increase your overall credit limit, you’ll want to make sure that you aren’t applying for a new credit card very often. Applying for a new credit card creates a hard inquiry on your credit history. Hard inquiries have a bad impact on your credit score, and while this impact will fade over time, they can remain your credit history for two years.
If you’re looking to improve your credit score (and make sure that it stays improved over time), ensure that you’re only applying to a new credit card if you absolutely need to.
Diversify Your Credit
While diversifying your credit doesn’t improve your credit score, if you’re looking to increase your chances of being accepted for a new loan or opening a new credit card, lenders like seeing a diversity of accounts on your credit history. Often referred to as a credit mix, this term describes the types of accounts that can be found on your credit history.
Car loans, credit cards, student loans, mortgages, bad credit loans, and other types of credit accounts with a healthy payment history on your credit score will help to improve your credit score, but also makes your application more inviting to a credit lender. Just be sure that you don’t open any unnecessary accounts to your score just in an attempt to make your history more appealing to a lender!
Build Better Credit Now
From all of the financial decisions you’ve ever made, we all create our unique credit history. Whether you’re looking to boost your low credit score, pay off your payday loans, polish your good credit score, or if you’re looking to start building your credit score, we can all find ways to improve our scores! Keep in mind that there isn’t a fast lane to improving your overall score, but developing healthy financial habits are what matter in the long run when looking to improve your credit score!
If you’re looking to stop struggling with a low credit score, work towards building better credit now. Check out our blog for more information!