Credit is everything. It makes the world go round.
And as long as you have a credit score, you can get your hands on practically anything!
Credit and loans make our lives easier in so many ways. Most of us take this for granted, and that’s precisely why we want to give you a few quick tips on boosting your credit score.
What Is a Credit Score?
A credit score is a number that a lender, such as a bank or a mortgage company, uses to determine if you’ll be able to pay back a loan. It’s calculated based on your payment history. A scoring model weighs various aspects of your credit report and assigns it a number between 300 to 850. The higher the number, the better the score and your creditworthiness.
The Top 4 Reasons Why You Need a Good Credit Score
1. More Housing Options
Some landlords and property managers may use the credit-based scoring model to determine if you’ll be able to make rent payments and have a timely payment history. It’s simple math: the higher your score, the more likely you will pay on time.
2. Insurance Discounts
A good credit score can help you receive life insurance or vehicle insurance discounts. Getting the same coverage at a lower cost can be challenging if you’ve got a bad credit history.
3. Security Deposit Waivers on Utilities
A credit score will help you secure a lower security deposit on utilities, such as electricity, gas, or water. It lets you prove that you won’t cut off service and stop paying the bill. In most cases, the higher your score, the lower the deposit requirement.
4. Better Rates on Loans
A good credit score can save you tons of money over time because you’ll get better interest rates on loans. This is especially true for mortgages due to their long-term nature.
8 Different Ways to Boost Your Credit Score
1. Review Your Credit Reports
Please review them for accuracy. Not all business transactions are reported to the bureaus, so ensure that your positive and negative accounts are written correctly. If anything looks suspicious, dispute it with the credit bureau.
2. Pay Your Bills On Time
Late payments can hurt your credit score. Paying late is the fastest way to build up a bad history. Please keep track of your bills and pay them on time each month.
3. Check Your Credit Utilization
Your credit utilization ratio tells you exactly how much of your available credit you use on any given month. A lower ratio indicates that you’re less likely to default on your debts.
4. Keep Old Accounts Open and Deal with Delinquencies
Your score’s age of credit portion represents how long you’ve had credit. Keeping old accounts open is one of the most effective ways to keep this part of your score high. Deal with any delinquencies on credit cards or loans by making on-time payments and closing the account balances.
5. Raise Your Credit Limit
The credit utilization ratio doesn’t just consider the amount of debt you have but also the available credit. The more credit you have available, the less likely you’ll be to default on debts. Request a higher credit limit on your existing accounts.
6. Consider Consolidating Your Debts
If you’re having trouble managing your debt, consider taking a debt consolidation loan from a bank or a credit union. You’ll get a lower interest rate, and it could potentially cut down on your monthly payment.
7. Use Credit Monitoring to Track Your Progress
Many companies provide free credit monitoring services. These companies will tell you exactly how your credit is doing at any given time. They’ll even send you an email letting you know when the bureaus have updated your report.
8. Consider Score Boosting Tools
Score boosting tools such as Experian Boost help you increase your credit profile by tracking other types of financial information, such as mobile phone payments, deposits, and utility bills.
4 Actions That Can Hurt Your Credit Score
1. Making Late Payments
Late payments can significantly impact your credit score because they appear as negative items in your report. They can also show up on your credit reports and affect other lenders who may be considering extending your credit. Late payments can stay on your report for seven years, so if you’re trying to build a good score, this shouldn’t be something that you’re frequently doing.
2. Applying for More Credit
Too many credit applications can negatively impact your credit score because there is a risk that you’ll default on the new debt. It’s generally not wise to apply for a large amount of credit at one time. This can skew your credit utilization ratio and make it look like you’re desperate to obtain more credit. It can also show numerous inquiries on your report, which lenders don’t like seeing either.
3. Having a High Debt to Credit Utilization Ratio
A high debt to credit ratio shows that you’re overextended and spending more money than you should be. This can result in a lower credit score, so it’s important that you keep your balances low, pay off your debts and avoid increasing your debt load.
4. Closing a Credit Card Account
If you close an account, that account won’t show up on your credit report and will shorten your credit history. This can hurt your credit score and debt to credit utilization ratio.
Maintaining a good credit score is an essential asset in life. Credit scores and reports can affect everything from job offers to the interest rates you pay on loans. These are just a few of the ways that you can increase your score. Taking these steps can also help you prevent identity theft and protect against fraud.