A good credit score is essential to your financial picture. It can get you lower interest rates on your auto loan, mortgage, credit cards, and various other forms of consumer debt – it can also keep your car insurance premiums down, and improve your chances of landing a job. So, if your score isn’t up to snuff, you’ve got some work to do. Fortunately, there are plenty of moves you can make to improve it.
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1. Don’t Pay Monthly Bills Late
Simply paying each and every one of your monthly bills on time is perhaps the best way to improve your credit score – it represents 35% of it, according to the website myFICO. If your bills are all due at different times of the month, contact your providers to adjust the due dates so they’re all grouped together.
2. Lower Credit Card Debt
Your level of available credit is also a significant factor in determining your score. If you’re currently using less than 30% of yours, you’re good to go – if not, make that a goal. You can create a personal budget on paper, through a website or an app.
Look for ways to reduce all monthly bills so that you’re spending less than you’re bringing in. Total up your credit card debts and get a monthly pay-down plan in place. As your balances decrease, your score rises.
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3. Review Your Credit Score in Your Report
Your credit report may contain errors that negatively impact your score. You can go to the website AnnualCreditReport to download your credit report via each of the three main credit reporting agencies (you can do so once per year free of charge). Look for any accounts that don’t belong on your report, and if you notice anything strange, contact the biller first – if that doesn’t solve the issue, file a dispute with the reporting agency online.
4. Raise Your Credit Limits
If you typically approach the spending limit on your credit cards, go ahead and ask for an increase. Although scoring agencies look at your overall level of credit, they also look at individual card limits – and boosting them can reduce your debt-to-available credit ratio. Just make sure you don’t start spending up to that new, higher limit.
5. Sign Up for New Credit Prudently
Just because you receive three stellar introductory offers for new credit cards doesn’t mean you need to apply for all of them. Every time you sign up for new credit, you generate what’s called a “hard pull” on your report. Too many of these in a short period of time can have a negative effect on your score.
Similarly, when searching for a home mortgage or auto loan, group your inquiries roughly within a two-week time frame. The credit scoring agency lumps them together as one, as long as they’re associated with the same type of credit.
While we often focus on our immediate financial needs – contributing to retirement funds, paying the rent, and so on – we sometimes lose sight of the big picture. Your credit score represents your overall financial stability, and if it’s not in solid shape, it’s your job to get it that way. Once you begin to see the results, your financial picture is sure to benefit.
Can you think of any other basic ways to improve your credit score?
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Kevin Andrews is a financial contributor who writes about issues related to credit and debt, retirement, investment savings, and more.