Your credit score impacts your life in a variety of ways. A good score will get you better loan and insurance rates, more housing options, and you may even qualify to get some goods and services without prepaying or making a security deposit. Having a low credit score, however, can make life challenging.
What is a credit score?
- Your credit score is a three-digit number that indicates the likelihood that you will pay back a loan. The higher your score, the less risk you pose for a lender. So, it’s basically a numerical representation of your creditworthiness, based on information from your credit reports.
- A credit score can range from 300-850.
What is a “GOOD” credit score?
- A credit score in the range of 670-739 is considered good. A score in the mid to upper 700s is really good and a score of 800 or better is considered exceptional.
- My credit score was at its lowest, when I was an undergraduate college student. I had a bad habit of maxing out credit cards. I’ve learned so much since then and my current score is in the “very good” range!
Increase Your Credit Score by Following these 7 Simple Tips
Boost your score and get ready to enjoy the perks that come with good credit!
Request Your Free Credit Report
You have a credit score for each of the three major credit bureaus: Experian, TransUnion, and Equifax. The credit score of each bureau is different, and it’s important to know the differences among them. You can get a free copy of your credit report from each of the three credit bureaus every 12 months by visiting annualcreditreport.com. Knowing your credit score can help you protect it and create a plan to increase it.
Establish A Credit History
Establishing a good credit history is vital to your financial health. When you don’t have a credit history you can’t get a loan, lease a car, or even get a job in some industries! The good news is that establishing a positive credit history is not that difficult. One simple way to establish credit history is to get a credit card. If this is your first card, the credit limit may be $1000 or less. You can use this card as a way to start monitoring your spending and to learn about how a credit card works. I really love the Petal card for beginners. This card is designed to help people build credit. You get rewarded for on-time payments with cash-back incentives, you can set a budget with reminders of your spending limit, and freeze your card any time. Plus, Petal Card reports to all 3 credit bureaus to further help you establish your credit history.
Only Apply For The Credit You Need
One of the biggest mistakes that people make when trying to increase their credit score is applying for credit they don’t need and can’t manage. If you’re thinking about applying for a credit card because it comes with a $100 gift card, 15% off your purchase, or some other type of incentive, you should probably reconsider. Too many new accounts will actually hurt your credit score, making it more difficult to get the credit you do need. If you must take out a loan, only apply for the amount you need. Survey your finances and make sure you could pay back the loan within 6-12 months. If you can’t, consider applying for a smaller, more manageable amount or brainstorm other ways to get the funds.
Become An Authorized User
One of the easiest ways to increase your credit score is to become an authorized user on the credit account of a friend or a family member. Being an authorized user means that you technically have permission to use the card. However the great thing about this hack is that you don’t have to use the card in order to increase your score. When you are added as an authorized user, the card is now added to your credit history. That means, if the primary owner has had the card in good standing for 5 years, that same credit history now applies to you also! Since you don’t have to make any purchases, you can build your credit score without having to accrue any debt.
Pay Bills On Time
Paying your bills on time is another simple way to increase your credit score. Every time you make a timely payment, you’re adding to your credit score and building “good credit history”. Payment history makes up 35% of your credit score. This is why paying your bills late is considered negative history and drops your score. Avoid late payments by putting your bills on autopay. Some companies will even offer a slightly lower payment for setting up automatic payments. If you do incur a late fee, call your creditor and attempt to have the fee waived so that the “negative incident” isn’t reported to the credit bureaus. Even if you only have a few late payments, these can stay on your credit report for up to 7 years!
Avoid opening new credit accounts
If you already have a good credit score, it’s tempting to open new credit accounts. But don’t do it! Each time you apply for credit, a hard inquiry is placed on your credit report, which lowers your credit score. For example, if you are applying for a mortgage, car loan, or even a cell phone plan, the lender or dealer will often check your credit report. If your credit score is already low (660 or lower), you can’t afford to have these hard inquiries on your report. Wait until your score is in the 700s or higher before you open any new accounts and only do so if absolutely necessary and you have the means to make timely payments.
Pay Off Part of Your Debt
Credit is weird. Imagine you have a credit card with a limit of $1000. If you use more than 30% of this line of credit ($300), your score will suffer. Having a maxed out credit card isn’t a good look either. Paying off part of your debt improves your credit score by reducing the amount of debt you have. You’re essentially reducing your credit utilization and debt-to-income ratio. All this means is you look more responsible to a lender if you have credit and use it modestly. So add a few extra dollars to your monthly payment or use any extra funds you get to pay down your debt. You’ll be rewarded with a well-earned increase in your credit score.
Conclusion
Boosting your credit score has several advantages and gives you greater access to live a more abundant and fulfilled life. Which one of these tips will you try? Sound off in the comments then share this post with a friend. Remember, nothing is too hard for God, not even boosting your credit score!