Almost everything significant in life requires you to have a good credit score. If you’ve been watching yours lately, you may notice it hardly moving, if it moves at all. It would help if you created a plan to proactively move toward a higher credit score, as every decision you make can affect it in large or small ways. Here are a few tips for improving your credit score and working toward a brighter financial future.
1. Keep Up With Payments
As a responsible credit user, you should always keep up with your payments. A late or missed payment might stick on your record for years, detrimental to your credit score. Always pay at least the minimum payment every month. Scale back on using your credit cards if they’re too difficult to keep up with.
2. Use Less Than 30% of Your Credit
You can check your credit utilization in many ways, though the easiest might be from your credit card provider. Using less than 30% of your available credit proves you can responsibly manage a large amount of credit. Having more accounts can also increase your credit limit overall, meaning you’ll have more money to spend within that 30%.
3. Open New Accounts
This tip is double-sided, as it could potentially hurt you if you aren’t careful. Opening new accounts can lower your average credit age, which might affect your score in a minuscule way. When you consider opening new accounts, look for one that offers you great rewards while also having a good chance of accepting you. The higher your credit score, the likelier you’ll be to receive acceptance for the cards you want most.
4. Don’t Open Accounts Too Often
While you should aim to open new accounts when they can serve you, you also want to open accounts sparingly. When you open new accounts frequently, lenders might see you as more of a risk than a responsible person. You might also notice that many accounts can be difficult to track, and if you don’t have automatic payments scheduled, you might miss one.
5. Refinance Your Car
When rates change, it’s always a good idea to consider refinancing. Refinancing your car loan can help you make payments on it while retaining the value of your vehicle. If you have bad credit, refinancing may actually improve your FICO score. The subprime loan comes with a higher interest rate, but if you can make the payments on time, it will reflect positively on you and could improve your credit.
6. Pay Off Existing Debt
Being too deep in debt can affect your credit negatively and put an extra burden on you every month. The average American is over $96,000 in debt, though that includes mortgages. The sane American had, on average, around $17,000 in personal loans and over $5,000 in credit card debt toward the end of 2021. If you find yourself on the higher end of those numbers, you may need to decrease your overall debt to increase your credit score.
There are two methods of debt repayment you can use to your advantage:
- Debt Snowball: paying down the debt with the lowest balance and working your way up
- Debt Avalanche: paying down the debt with the highest interest and working your way down
Find a repayment method that works well for you. You may need to cut back on other areas of your budget, but it can help you pay off debt more quickly than you would by just making monthly payments.
7. Review Your Credit Reports
Every month, you should check your credit report. It should tell you the details of how your score has changed recently, if it has, and might provide personalized tips for raising your credit score. Check often, as you will only know what you need to change if you know your current credit health.
8. Consolidate Your Debt
If it’s an option for you, consolidating your debt might be the best way to pay it off. Take out a debt consolidation loan from a bank. Then, you’ll only need to worry about one payment to the bank instead of several payments to different sources. Make sure you know what you’re doing, and ask for financial advice if you feel uncertain, as this option isn’t great for everyone.
9. Keep Old Accounts Open
Your credit age is a major factor in your credit score, so you shouldn’t immediately close old accounts you don’t use anymore. You can keep those lines of credit open for something small and only use them occasionally. Consider designating one old credit card for a certain expense, like gas or groceries. You might even use credit rewards to help you pay for things like holiday shopping, which might be another good use for an inactive card.
Use Your Credit Wisely
When you seek to improve your credit score, you can’t just let things automate themselves. You must be proactive in building your credit and take deliberate steps to improve it. Fortunately, while the process might be confusing at first, you can quickly understand what the power of controlling your credit can do. Then, you can reap all the benefits of a higher credit score, like buying a home or getting a larger loan.
This article 9 Tips for Improving Your Credit originally appeared on Rick Orford - Helping You Invest In Yourself.