Your credit score is the most crucial factor to consider when it comes to your financial health. A low credit score can keep you from purchasing a car, buying a home, or even being able to rent an apartment. It can also make payments higher on insurance, phone services, and cause costly deposits. If you have a low credit score, you will get denied loans and pay higher interest when a creditor gives you a chance. If you have a low score, don’t count yourself out. Here are seven steps you can take to improve your credit score and build trust for future creditors.
Pay Your Bills on Time
While paying your bills on time should be a no brainer, it is remarkable how often people don’t realize what a difference just doing so will make in their financial health. Not all of your bills land on your credit, although you should make a budget to help you pay 100% of your bills on time. But be especially focused on paying those reported to the credit bureaus. These bills include credit cards, car payments, mortgages, and medical bills. Also, anything you cancel, make sure you pay any outstanding balances. Those may not have been reported when you were using the services. Still, any outstanding unpaid balance will go to a creditor and land on your credit score, bringing it down.
Get Credit for Making Utility and Cell Phone Payments on Time
The credit reporting entity, Experian, has added a new feature called Experian Boost. Through the Experian website, you can opt into the free product and connect your bank account. If you pay any telecom or utilities on time, it will be added to your Experian credit file and update your overall credit score. If you’ve been making utility and cell phone payments on time, there is a way for you to improve your credit score by factoring in those payments through a new, free product called Experian Boost.
Check into other sites that allow you to have your rent and other bills that typically aren’t reported factored into your credit score. Using these credit-boosting tools has show scores to go up as much as 40 points within 90 days!
Pay off Debt and Keep Balances Low on Revolving Credit
Reportedly, the highest debt most Americans carry is credit card debt. Second is loans for cars, a mortgage, or other loans that carry interest. You must pay these debts as quickly as possible. Making the minimum payment amount is also not recommended as the first several payments will be going towards interest instead of the principal. Focus your largest payments on credit cards or loans that have the highest interest.
Open New Credit Accounts as Needed
Some believe that opening multiple credit accounts and making on-time payments will increase their credit score. The opposite is true. Having many accounts reflects poorly on our overall score, so only open the ones you need. Unnecessary credit can create too many hard inquiries on your credit report, which is harmful. It could also tempt you to exceed your means and accumulate debt.
Don’t Close Unused Credit Cards
If you have multiple credit cards, the damage has been done, keep them open, even if you don’t use them. Closing them can harm your credit. As long as the cards have no fees, keeping them open will be beneficial.
Don’t Apply for Too Much New Credit
Some people don’t realize that every time you apply for credit of any kind, the credit inquiry hits your credit score. These hard inquiries are acceptable if they are few and far between, but they can have an adverse effect and lower your score if done close together. These inquiries include applications for store cards that department stores offer, credit cards, and loans. If you are trying to purchase a car or home, it is suggested that you don’t apply for any other new credit within six months of trying to obtain a longer-term loan. Also, consider going to your banking institution and getting a pre-approved loan amount before home or car shopping, then you won’t have multiple inquiries if you are indecisive.
Dispute Any Inaccuracies on Your Credit Report
Disputing inaccuracies is another credit builder that people don’t realize they can initiate. Many sites offer a free credit score report that you can check every day without counting as a hard inquiry against your credit score. If you have an inaccuracy with any of the three credit bureaus, TransUnion, Equifax, and Experian, you will need to dispute it with the appropriate credit entity immediately. If you catch an inaccuracy early and have it removed, you can minimize or eliminate any damage to your credit score.
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