How You Can Improve Your Personal Credit Score
A good credit score is a vital part of your financial health. It is one of the biggest factors for determining if you can get loans and the terms of the credit that you do receive. That means that everyone should put in some effort to keep it in good shape. Fortunately, there are quite a few things you can do to improve your credit score.
Manage Your Credit Cards
Your credit cards offer the best opportunity to improve your credit score. The easiest way to do it is to pay your balance as quickly as possible. One of the components of your credit score is the percentage of your credit limit that you are actually using. It is best to stay below thirty percent of your limit.
You can also boost your score by consolidating that debt onto a single card. The scoring agencies also consider the number of cards that you have that currently have any debt on them. The more card with debt, the lower the score. That means that owing ten dollars on one card is better than owing five dollars on two cards. Most people can benefit from picking a couple of cards to use for most of their purchases and paying off all of the other ones.
Use Good Debt
One of the biggest factors on your credit score is your history of paying debts. Making payments on time will increase your score while missing payments will lower it. Each item on the list will last for seven years.
It isn't always easy to make payments on time, but you can take some steps to make it easier. Be sure to set up reminders for all of your bills so that you remember to pay them on time. People do forget to pay even when they have the money, and it is easy to avoid that costly mistake. If you are having trouble making payments, seek out a credit counselor or get in touch with the creditor to try and find a resolution before it ruins your score.
This does mean that it can be a good idea to take on some debt, as long as you are sure that you can pay it off. That gives you a history of payments that makes you much more attractive to lenders. After all, a person who has never had a loan before is a wildcard. They might be a safe choice, but they could also be a bad one. Past behavior really is a good indicator of future actions when it comes to finances, so the credit score favors people who have a history of payments.
Time Your Applications
People who apply for a lot of loans tend to take on more debt, so your credit score will generally dip with each application. There are exceptions for student loans, car loans, and mortgages because lenders know that most people will shop around with many applications for those but only take a single deal.
The scoring formulas will only offer that exemption if you make the applications within a short period of time. The size of the window ranges between two weeks and 45 days depending on the exact formula that is in use. It can be possible to time it precisely with some research, but most people can get away with just making an effort to do all of their comparison shopping at the same time.
Avoid Excess Accounts
It can be tempting to open new credit accounts even if you don't need them in the hope of raising your score. That tends to be a mistake because it can tempt you into spending money unnecessarily. Even people who do avoid that temptation tend to find that it doesn't do much good. The credit score calculations simply do not think that a new and unused account is very important, precisely because it would be too easy to exploit the system by opening new ones if they did have a big impact. The vast majority of people will get better results by managing the accounts that they have rather than by opening new ones.
Prevent Identity Theft
Identity theft can cause a lot of problems for your credit score. A criminal who is using your accounts is unlikely to care about responsibility or making payments, so their purchases can reduce your scores.
The most important thing to do is to keep an eye on your accounts for signs of fraud. If you do see unexpected purchases, contact your bank or credit card company immediately. They can remove the charges and help block the thief from using your information again. They should also help to fix your credit report. That means that it will recover once you have resolved the problem. It just takes a lot of time and effort, especially if you catch the problem late, and you might have problems due to a low score while they fix it. Stay vigilant and act fast at the first sign of trouble to stop that from happening.