• Allison Castle

10 Tips To Boost Your Score

How well do you know your credit score? and 10 tips to boost it

Ah, the credit score. We may not give it much thought until….we want to make a large purchase like a home or car.

Thinking about your credit score may not exactly be your idea of fun but it is very important to know your credit score before you decide to make a large purchase or commit to other life-changing events (moving, marriage, employment, business ventures, etc).

Your credit score is a 3-digit number typically ranging from 300-850 (higher is better) that relates to how likely you are to repay debt. Bank and other lenders use your credit score to determine whether they will loan you money and what the loan term will look like.

Your credit score can get you better (or worse) terms on your loan or prevent you from getting a loan at all. Other fun facts: Your credit score can impact your insurance premiums. Landlords and business partners will want to check your credit score. Even employers or potential romantic partners may want to see your credit score. Your credit score tells these individuals and organizations a lot about your reliability, trustworthiness, maturity, etc. Are you getting the sense that your credit score is important to know and understand?

Luckily it is pretty easy to find your credit score. You can find it by signing up websites such as CreditKarma, CreditSesame, Nerdwallet. Or if you currently have a credit card, many give you the ability to access your credit score by logging on to your account on their online banking site. This is the option I use and it gives me the ability to check my score as often as I want.

Now once you find your credit score you can take a look at the factors that are impacting it. These factors include:

-Your payment history (Do you pay on time?)

-How long you’ve had credit (How long has your longest account been open?)

-What types of credit do you have(Are your balances owed on credit cards, auto loans, student loans, mortgages, etc?)

-How much are your credit limits and how much of these are you are using (What % of your credit limit are you using?)

-How much debt you have (What is your total balance among all accounts?)

-How many hard inquiries are on your credit report (Have you applied for new loans or credit cards lately?)

Knowing your credit score and the factors used to determine it is the first step to improving it. Here are some basic steps you can take to improve your credit score:

1. Pay your bills on time every month.

2. Pay off debt and keep revolving (credit card) balances low. This lowers the percentage of your credit limit you are using and decreases your total debt.

3. Open new credit accounts only when you need them. This can reduce the number of hard inquiries. More hard inquiries lower your credit score.

4. Do not apply for too many new credit lines at the same time. More hard inquiries lower your credit score.

5. If an unused credit card does not have annual fees leave it open. This improves the percentage of your credit limit you are using. This also helps you build account longevity.

6. Check for errors and discrepancies and dispute any inaccuracies you find. This step takes more time (but its worth it!) and will require the use of your credit report. Your credit report differs from your credit score in that it is a collection of account history for all the companies you have had credit with. This detail can help you discover if there is anything being reported incorrectly. You are entitled to a free credit report once per year. https://www.annualcreditreport.com/ is a great place to start. If you do find errors this article lays out the steps to take to get them corrected https://www.lexingtonlaw.com/credit-repair/fix-credit

If you are already doing all of these and would like to do a bit more to boost your credit score you can use these additional strategies:

1. Make small payments on your credit cards throughout the month. Even if you pay off your credit cards each month (which is highly recommended to avoid extremely high-interest charges) you may still be seeing a lower credit score due to your credit utilization percentage. Ideally, you want to keep this percentage below 30% on each credit card/revolving line of credit. For example, if you have a credit limit of $10,000 on a credit card you want to keep your balance below $3,000. If your tendency is to have a balance of more than 30% of your credit limit consider making small payments throughout the month to keep your credit utilization percentage in the ideal range.

2. Ask for a higher credit limit on your current credit card (this is not a hard inquiry so it will not negatively impact your credit score). This is not a request so that you can spend more! This is a request to optimize your credit utilization percentage. For example, if you put $3,500/month on your credit card with a $10,000 limit you are at a 35% credit utilization rate which is not in the ideal range of less than 30%. If you are approved to have your credit limit increased to $12,000 or more your monthly credit card usage of $3,500/month will be back in the ideal range of less than 30%. Isn’t math fun!!

3. Become an authorized user on a credit card held by a responsible friend or family member who has a high credit score. In this scenario, you may not even use this card. The purpose is to give you a longer credit history and improve your credit utilization percentage. I find this to be a great option for teens/young adults who would like to build their credit for future home and auto purchases.

4. Use services like Experian Boost to add a history of on-time utility and phone bill payments to raise your credit score.

Now that you know even more than you ever wanted to know about your credit score, I would love to know what’s your next step! Which of these tips will you use to boost your credit score and help you prepare for that next big purchase or life event?

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