Your credit score is a number that lenders use to assess your creditworthiness. It’s based on a variety of factors, including your on-time payment history, the amount of debt you owe, and the length of your credit history. A good credit score can help get approved for loans, or even qualify for lower interest rates, thus saving you loads of money in the long run!
If you’re looking to improve your credit score, there are a few things that you need to do that you could start today. These are some tips that I personally used to go from a low 500 credit score to almost a 800 credit score.
Disclaimer: I am not a Financial Advisor, and this is not financial advise. These tips are things that I did, in no specific order, to help me improve my credit score. I also shared these tips with my wife and helped her raise her credit score to well over 700.
Pay your bills on time: One of the most important tips that I can give you, is to pay your bills on time. This should be a rather easy thing to do, but I personally know some people that struggle with this concept. Why are some people not paying their bills on time you ask? There could be multiple reasons. I sometimes take a ding to my credit score when I forget to pay off the statement before the due date. Mistakes happen, we all make them, just don’t make a habit of it and you will do just fine. Trust me!
Keep your utilization low: Credit utilization is the percentage of available credit that is given to you compared to the amount of credit that you are using. For example, if you have a $1,000 credit limit on a credit card and you spend $500 on that card, you are using 50% of the credit available. This would be 50% utilization.
- Quick tip, you can use 100% of your utilization every month, as long as you pay it off before that credit card reports to the credit bureau’s. Please do your own research on all credit cards that you get, and if you have any questions, ask all your questions to a representative of the credit card companies.
Length of credit history: This is something that will not happen overnight. I have experienced first hand the power of my credit score compounding over time like those sweet sweet dividends compounding in my Roth IRA. The sooner you open accounts, the longer those accounts can impact your credit score.
Avoid hard inquiries: A “hard inquiry” happens whenever a lender pulls your credit to check your creditworthiness. This could be for a car loan, new credit card, mortgage loan, and so on. Too many of these, and lenders may start denying you of your requests simply because you seem too risky and maybe a little too ambitious for your own good. I know this because I was denied for being too risky. I tried applying for 4 credit cards in 1 year, but I happily settled for 3 in that year. This hard inquiries also fall off after 2 years on your credit report.
Dispute any errors on your credit report: I encourage you to check your credit report regularly, perhaps at a minimum of once or twice a year. Check and make sure that your name is spelled correctly, correct phone numbers, addresses, and so on. If there are errors, report it immediately. This is important to make sure that your identity online is correct.
- You can check your credit report for free at annualcreditreport.com, and is great resource to use. I personally use this website to check my credit once a year.
FINAL THOUGHTS:
- Always pay your bills on time!
- Keep credit utilization low!
- Start early in building credit!
- Avoid too many hard inquiries!
- Dispute all errors on your credit report!
If you follow these simple tips, I guarantee you that you will improve your credit score. Also, you will develop good habits in your life that will help you manage and save money.
Live below your means, and never give into the urge of overspending.
Thank you for reading. Hope this helps you and that you are able to share this information with someone you love and care about.
Alexander Kroening- REALTOR 