Having a good credit score is so important when it comes to being able to get loans at decent interest rates, getting a car, getting a mortgage or even obtaining any money in general. Having a good credit score can mean the difference between getting the money you may need and being able to borrow less money (if any at all) at a much higher interest rate. When checking your credit, try to do so by using a company which will show you the top 3 credit unions to give you a better idea of where you fall on the credit spectrum. Credit ratings typically go from 300 to 900 where anything over 810 is considered excellent and anything under 650 is considered very poor. Increasing your credit score even by 100 points can drastically improve the rate and amount of money you may receive when you need it most.
Pay Down Your Debt
If you have debt whether it’s a school loan, car loan, line of credit or especially any credit card debt, please pay it down right away. Your credit score will increase very quickly if you use less than half of your available credit (ideally closer to 35% percent). This shows potential lenders that you are cautious with how much money you use and just because you have access to it, doesn’t mean you’ll be maxed out all the time. You can obviously use more of your available credit if the situation calls for it, but try to get it back down as quickly as possible afterwards; the longer your debt is at less than 50% of your limit, the higher your credit score will go.
Don’t Close Old Credit Accounts
This is a big tip which I have personally fallen for, but after you’ve paid off some of your debt, don’t make the mistake of cancelling those cards, accounts etc because this will negatively impact your credit score. Instead, you can make these old accounts work to your advantage by purchasing something on them every few months and then paying it off right away. The longer you have your current accounts the more lenders will view you as “financially stable.�
Don’t Open New Credit Accounts
Just as you don’t want to close down old credit cards or lines of credit etc, you also don’t want to open up any new ones for a while. Every time you ask for more money, a higher credit limit, a new loan etc, your credit score will decrease slightly. Furthermore, if you ask for these loans and are denied, your credit will also decrease and you won’t even receive the necessary funds. If you need new credit available to you, by all means apply for it, but if you’re looking to raise your credit core drastically in the next 6 months, steer clear of new accounts for the time being.
Make Payments on Time
If you take one thing from this article please take this – your payments absolutely have to be made on time every month no matter what. By missing a minimum payment or two, your credit may decrease by over 100 points in as little as a couple months. If you are going pay check to pay check and cannot afford to pay down your debt, set aside just enough cash to cover your minimum account payments for a couple months in case something happened to your current stream of income. It is so important to make your payments on time if you want to increase your credit score.
Time Heals All
Everything on your credit report including bankruptcy, closed accounts, open accounts, payment history etc will stay there for 7 years so be very careful about how you choose to approach your credit. On the positive side, after 7 years your slate will be wiped clean and you can start over; any unwanted blemishes will fade away after that time. It is also important to note that the longer you make your payments on time, keep old accounts active, and have a low debt, the higher your credit score will be. If you implement these tips you should start to see your credit rising within just a month or two, and your score may very well increase by 100 points if you are serious about implementing these tips. Try to check your credit on a regular basis to make sure that everything is up to your standard and if anything seems out of place, don’t be afraid to write a letter to the bureau to ask questions or to clear up any misunderstanding.
Staz Johnson has been passionately blogging about personal finance, financial management, investing tips, and more. For more information, check out her website at Essential Finances or see her Facebook page here.