Good credit can determine whether you’ll get a mortgage, car or student loan. And bad credit will make it more difficult for you to get low interest rate on your credit card. It will also make it more expensive to borrow money for any purpose. But, with a few simple steps and a good routine you can turn it around! Here are some key guidelines that can help build and maintain a good credit score.
Ways to Get a Better Credit Score
Pay your bills on time.
It is very important to pay all of your bills on time, every time. We know, it’s hard, but you need to make it a priority. You can set up automatic payments or electronic reminders to help you keep up with all the bills. If you’ve already missed payments, catch up and stay on top of it.
Pro tip: it can even extend to items that aren’t normally associated with credit reports, like library books. Yes, putting cash into a savings account for a major purchase is smart, you should not sacrifice the regular bills to do it. So first, pay off all of your bills and keep up with them. You will be pleasantly surprised about how fast your credit score will be going up!
Keep your credit card balance as low as possible.
If you have a credit card, you know that it helps build your credit score over time. And while paying off the balance each month helps you get the best score, try to keep your balances at no more than 30 percent of your credit limit. Credit scoring looks at how much revolving credit you have, how much you’re actually using and how close you are to being “maxed out”.
To boost your score, pay down your balances, and keep those balances low. For example, you can pay off your credit card several times a month. The ideal revolving balance that keeps your credit score rising is under 12%! Even if you’re paying balances in full every month, your credit score will weigh your monthly balances. A helpful strategy: Check with your credit card issuer if it accepts multiple payments throughout the month.
Keep a long credit history.
Credit scores are based on experience over time. The more experience your credit report shows with paying your loans on time, the more information there is to show that you are a good credit recipient. Some people mistakenly believe that old debt on their credit report is bad for your credit score. When they get their home or car paid off, they get it removed from their credit report. However, while negative items are bad for your credit score, we do not recommend getting old accounts off your credit report just because they’re paid. The credit bureaus and the credit scoring formula places less weight on inactive accounts. Debt that you’ve handled well is actually good for your credit.
The longer your history of good debt, the better it is for your score. A good way to improve your credit score: Leave old debt and good accounts on as long as possible. This is also a good reason not to close old accounts where you’ve had a good repayment record.
Limit your applications for new credit.
Last, but definitely not least, remember to stick with a few credit cards for awhile. Don’t apply for a new card every month just because it has a nice sign up offer! Credit scoring formulas look at your recent credit activity as a signal of your need for credit. If you apply for a lot of credit over a short period of time, it will seem that you are in negative economic circumstances, which will lower your score.
Landlords, insurers and employers frequently use credit information to see if the people they are dealing with are reliable and responsible. If your score is low, the apartment deposit or your interest will be higher. It might be necessary to work on your credit score if you are planning to rent an apartment or get a new job.
If you are new to credit, consider getting a secured credit card with no annual fee and just spending a little bit and paying it off every month. They are tailored to helping consumers new to credit to establish and build credit score. And some of them offer cashback that you can spend on something fun or exciting!