10 Ways You Can Improve Your Credit Score
Understanding your credit score and how to improve it is important if you have financial goals you would like to achieve. Lenders rely on your credit score to determine if and how much you can borrow from them. Fortunately, boosting your credit can be easy, but it will be a long process to prove that you can be responsible over time.
If you are ready to improve your credit score so that you can borrow more, here are 10 ways to improve your credit score.
1. Check Your Credit Report
The very first thing you should do when you’re trying to repair your credit is to make sure that it’s accurate. To do this, download a full copy of your credit report and check it over for mistakes.
You can always get a free copy from any of the three major bureaus once per year. Inside, you’ll find records of every credit card or loan you’ve ever had, their status, notices if you were ever delinquent on payments, and a lot of other information that’s important to lenders.
The most important goal is to make sure that they are all in fact your accounts and that there aren’t any on the report by mistake or falsely opened under your name and info due to identity theft. If there are mistakes, you have the right to file a dispute and request that they are removed from your report.
2. Leverage Autopay For Timely Payments
The biggest portion of your credit score is your payment history. Even a single missed payment can cause significant damage to your overall score. Fortunately, with the convenience of the internet and online banking, missing payments can be a thing of the past.Â
One of the easiest ways to ensure a good credit score is to enroll in autopay for as many bills as you can so you never even have to think about whether you made the payment or not.
Not all bills will allow you to enroll in autopay though. For these types of bills, I like to set a recurring alarm on my phone for a few days before the due date. I always set it up for the evening hours when I’m at home and can easily hop online to make the payment or cut a check to put in the mail.
3. Pay Down Your Debt
At least 30 percent of your FICO score is determined by how much debt you owe to all creditors. This is known as revolving debt, which is any money that you borrowed or financed from a lender or other institution. Your credit cards, mortgage, auto, college, and personal loans are all revolving debt, for example.
Your goal, of course, should be to pay down this debt as quickly and responsibly as possible – there are many ways and methods to get rid of debt! Not only will it be good for your credit score, but it could also save you tens of thousands of dollars in interest payments over your lifetime.Â
4. Get A Secured Credit Card
A secured credit card is one where you make a deposit to the bank to hold in exchange for limited borrowing power. My first card required me to put $200 down to secure the credit line for the same amount. This gave the bank some recourse in the event that I would have defaulted on the payments. They weren’t really taking a risk by allowing me to borrow because I was really only using the money I had already put down as a deposit.
Eventually, your secured credit card might give way to an unsecured card with a greater credit limit. Unsecured just means that the line of credit isn’t backed by any collateral, so failure to pay back the money that you borrow will only result in a negative credit score.
Another example of a secured line of credit would be a mortgage, because your home is the collateral, and if you don’t pay your mortgage, the lender can repossess your house.
5. Limit Your Spending
A lot of people view their credit cards as free money. I know I sure felt that way when I was just starting out. It was so easy to swipe my card at the register and worry about the payment later (or not at all). This is how so many people end up maxing out their credit cards. And if you are looking to improve your credit score, maxing out your cards is the last thing you want to do.
Most lenders want to see your credit utilization hover right around 30%. This means that you should never be borrowing in the upper limits of your credit card. For every $1,000 you can borrow, you should never spend more than $300 of it. But if you have already maxed out your cards, do your best to pay them down until you get to a revolving balance of just 30 percent.