5 Tips to Improve Your Credit Score
Learn more about boosting your credit score with our expert tips.
When you are looking to improve your credit score, it can be difficult to know where to begin. Whether you are starting to build your credit from scratch, or looking to boost your credit score after a dip, it is important to understand how your scores are calculated and the basic ways to improve them.
Improving your credit score is possible by following a few simple steps, including opening new accounts that report to credit bureaus, keeping low balances and making sure to pay your bills on time. You can also try boosting your credit score by getting credit for paying standard bills such as utilities, your phone bill, or even streaming services.
Tips to improve your credit score
Tip #1: Focus on building your credit file
It is important to understand that having a history of being a good borrower isn’t possible without having several open and active credit accounts in your name. For this reason, we recommend opening new accounts as a first step in building your credit file. It is important that these new accounts will be reported to major credit bureaus, which is a common practice of most major lenders and card issuers. We recommend considering credit-builder loans or secured cards if you are just beginning your credit journey or have a low score. Rewards credit cards with no annual fees are great considerations for those with established credit scores who are seeking improvement. Don’t forget that simply getting added as an authorized user on someone else’s credit card can help your score, too! Many credit bureaus recommend having five or more accounts as a recommended number to build toward over time. Not having enough accounts can make it challenging for scoring models to render a score for you. As an example, the average consumer with a credit score of 800 or higher (which is considered “excellent”) has 10 revolving credit accounts.
Tip #2: Always pay on time
Payment history is one of the most important considerations in determining your credit score. One of the best ways to achieve an excellent credit score is by having a long history of on-time payments. Be diligent and stay on top of loan and credit card payments to ensure you don’t miss payments by more than 29 days. Payments made 30 days late can be reported to credit bureaus and harm your credit score. It is also important to avoid letting bills go into collections, which can cause your score to down turn.
Tip #3: Pay off past due accounts
Stop additional late payments from being added to your credit history by catching up on past due accounts. Having all your accounts current can be good for your credit score, and you’ll avoid additional late fees. According to NerdWallet, if you have otherwise perfect credit, a late payment that's more than 30 days past due can knock as many as 100 points off your credit score.
Tip #4: Monitor revolving account balances
If you aren’t behind on any payments but tend to have a high balance on revolving credit accounts, this one is for you! High credit utilization rates can hurt your score, so it is important to monitor and maintain a low balance on them relative to credit limits. For example, credit card utilization should be around 30%.
Tip #5: Be mindful of new account frequency
Despite needing to open accounts to build your credit in the first place, is important to be mindful of how often you submit credit applications. Applications can sometimes result in a “hard inquiry”, which may negatively impact your score. Opening new accounts can also decrease your average age of accounts, which in turn can also impact your score. While these factors are not huge contributors to your score overall, understanding their impact can help you make informed decisions when shopping for specific types of loans, like auto loans.
Then I would conclude with something along the lines of line how these actions can help everyone so how everyone should be thinking about them even if they’re not applying for a mortgage soon because it can take a while to see the boost reflect on your credit score.
The bottom line is, nearly every part of your financial life is subject to the strength of your credit score. Even if you are not thinking of applying for a mortgage soon, having good credit can impact several other aspects of your life. According to CNBC there are many advantages to having a good credit score. For example, you’ll have an easier time renting an apartment, get the best rates on car and homeowners insurance, qualify for lower interest rates on loans, and be better prepared for the future.
