The single most important thing you can do to improve your credit score is to pay off existing debt. However, there are 10 other things that you should be aware of so you can have the best credit score possible! These ten ways you can improve your credit score include:
1. Don’t miss payments.
The most important element of a good credit history is a track record of paying your bills on time. Late payments, even if they’re just one or two days late, can lead to fees and penalties that can cost you hundreds of dollars per year. Missed payments will also damage your score and may even result in the loss of some services such as cell phone service.
If you have had trouble paying bills on time in the past, be sure to resolve those issues before applying for any new lines of credit or loans (such as mortgages). As long as there are no other negative marks on your report—such as bankruptcies or charge-offs—you can repair your score by making all current payments on time for 12 months or more.
You should see an improvement within two years if everything goes well! this way, you can increase your credit score before you even know it.
2. Pay your bills on time.
This might seem obvious, but it’s not just about paying the bill itself. If you pay late or miss a payment, your credit score will be impacted as well.
Should you find yourself unable to make payments on time due to legitimate circumstances such as job loss or medical expenses, reaching out to the concerned company to explain your situation is advisable. By requesting an extension, you can ensure they don’t report your late payment to the credit bureau, a process we will delve into shortly.
If you have a history of late payments, the best thing is just to pay everything off as soon as possible. It may cost you more in interest rates, but it’ll help rebuild trust with lenders (and keep lenders from cutting off your access to other lines of credit).
3. Don’t max out your credit cards.
When you max out a credit card, you’re using 100% of the available limit on that card. This can hurt your credit score and make it harder to get a loan or other financing in the future. In addition, it’s possible to get stuck paying interest on purchases that are already made if you don’t have the cash to pay off the balance in full each month.
Use only what’s necessary for each transaction and pay off your bill right away so there are no unpaid balances outstanding for more than 30 days.
If you have an outstanding balance on one of your accounts, consider putting some money aside from each paycheck until that account is paid down enough so that there is no longer an outstanding balance (and no recent inquiries).
4. Keep the balance on your credit cards low.
You can improve your credit score by paying off your credit card every month. If you do this, you won’t be charged interest on the balance and will only pay the original amount owed. This is important because interest payments reduce your available credit limit, which in turn limits how much money you have to spend in future months.
If you don’t pay off your credit cards each month, however, this could hurt your credit score significantly. The reason for this is that if there’s a high percentage of debt on one account compared with other accounts in good standing (which means that it’s being paid on time), lenders may view this as an indication of financial instability or riskier behavior.
5. Mix it up a little (types of credit you have).
Mixing up the types of credit you have is an easy way to improve your credit score. If you have a lot of one type of credit, such as store cards, it can make your report look like you’re desperate for new stuff. So to improve your credit score, try to mix things up a little.
6. Add new credit accounts only as needed.
Another way to improve your credit score is by not applying for new credit accounts unless you absolutely need them. Just like it’s smart to keep your emergency fund in cash, it’s also smart not to apply for any new credit accounts if you don’t really need them.
If you’re thinking about taking out a loan or opening up a new credit card because the interest rate is lower than what you’re paying now on existing debt (which means less money spent on interest payments), then do some careful research before making such a big decision.
7. Don’t apply for too much new credit at once.
If you’re applying for a car loan, mortgage or even a new credit card, it’s important to not apply for too much new credit at once. This is because each time a lender pulls your credit report (and scores), it results in a hard inquiry on your credit file that can lower your score by just a few points.
So while one or two hard inquiries won’t affect your score very much and may not even be visible on the free versions of some sites like Credit Karma, it’s best to try to space out multiple applications over time so that fewer inquiries are made within a short period of time
8. Check your credit report twice per year – for free!
It’s important to check your credit report or FICO score regularly, and for free. This will allow you to ensure that it is accurate and up-to-date. It’s also helpful to be notified of any errors or suspicious activity as soon as possible, so that you can correct them before they affect your score.
There are three credit bureaus in the U.S.: Experian, TransUnion and Equifax. Free credit reports are available from all three bureaus every 12 months – although only one per year if you request via mail rather than online – so take advantage of this valuable resource! You can request a copy of each bureau’s report by visiting annualcreditreport.com
9. Pay off debt instead of moving it around.
Don’t transfer balances from one card to another. Moving your balance will only delay the inevitable and cause you to pay more in interest over time.
Don’t close old cards and open new ones when you have an existing balance on a different card. While this may seem like a good idea at first, it can actually hurt your credit score. You won’t be able to establish credit history with the new company until they report it to the bureaus. They could take months or years depending on how quickly they report information about their customers’ accounts.
Don’t apply for a new credit card to pay off an existing balance on another one — even if you pay off all of the balances each month. This approach can lead to low accountability because there aren’t any fees associated with having multiple cards open at once.
However, this behavior also makes it difficult for lenders who are trying to assess whether or not someone is truly capable of paying back their debts without defaulting.
10. Review your credit report if you’re denied for a loan or if you see something unusual on it.
If you’re denied for a loan or see something unusual on your credit report, it’s important to review it to find out why. A credit report is like an informational snapshot of your financial history and can include information about where you live, what kind of debt you have and how quickly you pay it off.
Your credit score is calculated from the information in three different areas:
- Information from your lender(s) (these are usually banks or other financial institutions)
- Public records such as bankruptcy filings and court judgments
- Information from privately-owned companies that track consumers’ spending habits
Bottom Line
Improving your credit score is not an impossible task, and can make a big difference in the interest rates you pay in the future. A low credit score can cost you hundreds or thousands of dollars over time on things like car loans, mortgages, and even cell phone contracts
We’re all about getting to a more positive score, and we hope this guide was useful. If you still have questions on how to improve your credit score, be sure to check out this article on “How to Improve Your Credit Score To 800” in order to have more clarity on this topic. We try our utmost best to answer all questions asked directly in our space!
