Lots of goals are important for people looking to improve their financial situation. These goals are a wide variety, but one of the most frequent is trying to improve your credit score. While saving money, consolidating or eliminating debt, or finding new investments are all popular, the credit score is frequently overlooked. In addition, it’s closely looked at by potential credit card services, lenders, and other financial institutions. It has an effect on every major financial decision you will make, from buying a car or house to opening new accounts. As such, it’s a very smart move to try to improve your credit score. Here are some of the best ways to keep your score up, but first let’s take a look at the kind of people that will be looking at your credit score.
- Credit card companies
- Banks
- Lenders
- Car dealerships
- Real estate agencies
- Landlords
- Scholarship and aid programs
Keep Credit Card Balances Low as Possible
The most common type of credit card score is the FICO score, and this system makes up 30% of your score based on your credit utilization, which is the ratio of your total available credit to the balance you use. An ideal number to look for is 10%, which means you use only $1 for every $10 available to you in credit. Many people think that financial companies see people who run up their balances as great profitable resources, but these people really tend to be the ones who don’t pay their bills and end up as a loss for the company. Because of this, use your credit card wisely to keep your credit score low.
Avoid Impulse Opening
Impulsiveness can have its benefits, but none of them help when trying to improve your credit score. Making hasty decisions with large purchases will most likely have a negative impact on your credit card finances (as well as your credit score) in the future. Many stores offer retail credit cards that promise discounts at the retail store, but this is just the industry trying to take advantage of the credit card boom and vulnerable consumers. When you have lots of credit cards, it shows you as a person who borrows too much money and sees borrowing as income rather than insurance. That’s why multiple cards can set you in the opposite direction to improve your credit score.
Check Your Report for Errors
Many people who your financial stability depends upon will take a close eye to your credit report to gauge not only your credit status but also your responsibility. In this case, the responsibility of finding any errors on your credit report falls to you. Any discrepancies should be reported to the reporting company as soon as you can, because the Federal Trade Commission requires companies to investigate these occurrences within thirty days and it could significantly improve your credit score.
Make Your Payments
One of the biggest contributors to a low credit score is usually a failure to make payments on time. A whopping 30% of a FICO score is determined from payment history, and the record of your payments (as well as missed ones) stays with you and will be a detriment to your score.
Know Every Score
While we’ve talked much about the FICO score, it’s not the only one used by creditors. The next most popular was created by all three credit reporting bureaus (TransUnion, Equifax, and Experian). It’s called VantageScore, and a lacking in this score can undo whatever you’ve done based on the FICO system to improve your credit score. In addition, this score helps highlight your strengths and financial weaknesses.
Avoid Application Sprees
Once you improve your credit score, there’s no need to apply for every credit card you see advertised. Similar to our warning about multiple credit cards above, applying for many credit cards at once will appear on your record and make bureaus question your apparent sudden need for a much larger amount of credit—which looks suspicious on any occasion. New credit can change your FICO score by as much as 10%, so you should research the possible effects on your score before applying for a new card.
Improve Your Score with Credit
If you have dug yourself into a hole and need a safe and reliable means of improving your credit score, one of your best options is applying for a secured credit card. These cards are “secured” by a deposit that the cardholder puts down when the card is issued. Most often, this deposit is also the card’s limit, so it acts as a safer debit card rather than a credit card. Use these to develop more efficient repayment and use habits, and you have set the path to improve your credit score the easy way.
Find a Professional
Many professionals specialize in helping clients improve their credit scores, so if you have unknowingly lowered your credit score to a dangerous level and don’t know where to go; it’s your best bet to find one of these helpful experts. They can help you negotiate with credit companies, raise your digits substantially, and all with the ease brought about by the aid of a professional. Whether hiring a professional or making simple habit changes, improving your credit score is a smart step to take in improving your finances as a whole.