2nd Chance Consumer Advocates
7 Surefire Ways to Improve your Credit.
Having a good credit score will help you save money over the long run. According to Bankrate, the ideal credit score is over 700. Having a high credit score can help you negotiate a lower interest rate, obtain a credit card that gives you good perks, and in general, just be able to negotiate more with creditors and lenders.
If your credit rate is currently below 620, you may not be offered credit at all, and if you are, you will receive subprime rates. Obtaining and maintaining a high credit score will help you to secure low interest rates, get cheaper home and auto insurance (those with lower credit scores may not be able to get these at all), as well as possibly save you money on deposits for utilities or phone lines. If you don’t currently have the credit score you want, here are some ways you can improve your credit score for the future.
1. Paying bills on time
You will improve your credit score just by paying your bills on time every month. Delinquent paymentscan seriously harm your credit score, especially if they happen regularly. Most lenders will check your FICO score to determine if they want to give you a loan and at what rate you will get it. Thirty-five percent of the FICO score for the general population depends on your payment history, so how regularly you pay your bills will quickly affect your score. Your scores are calculated over time, so having poor credit in the past doesn’t mean you will have bad credit forever.
2. Reducing debt
Reducing your debt will help you in several ways: one, it will free up more money in your budget to spend on other things; two, it will potentially help you save a lot of money on interest long-term; and three, it will help you improve your credit score. It is also true that eliminating debt makes you feel good — it’s great to pay off a student loan or a car loan, as it takes a huge weight off your shoulders. It can be difficult to eliminate debt, so start by making an actual plan and then stick with it. Try to avoid using your credit cards, since that will just leave you with more high-interest payments in the future. Thirty percent of your FICO score is determined by how much you owe, so eliminating debt will directly affect your credit score in a positive way.
3. Setting up payment reminders
As mentioned in point one, paying your bills on time helps build your credit score. Sometimes credit scores go down because you have a lot of debt or can’t afford payments, but simply forgetting to pay your bills will affect your score equally. By setting payment reminders, you will pay on time and build up your credit. Some banks offer payment reminders, and you can set up email reminders for many utility payments. You can also set up automatic payments through your bank, but this should only be done if you know for a fact that you will always have enough money in your account to pay your bills on their due dates.
4. Not operating with a balance, which could lead to interest payments
If you have a high credit card balance, your credit score will suffer. Although paying your bills on time will help your credit, it isn’t a good idea to keep a balance on your card if possible. You are better off just using your credit card when you know you can pay it off and then doing so as quickly as possible. If you maintain a balance and then forget about it or you don’t have enough money to pay for it, you could end up paying interest payments. People also sometimes fall for the idea that if they use their credit card and can’t pay it back quickly, they have a full cycle before it’s due. However, the truth is that other bills will often come up unexpectedly, so you are better off avoiding this pitfall
5. Not opening too many accounts too fast
Opening too many credit cards too fast can negatively affect your credit score. Ten percent of your FICO score is calculated by how much new credit you have. If you open several credit cards at once, you may be seen as a credit risk, especially if you have a short credit history. Every time you apply for new credit, credit inquiries will show up on your report. If you really need to use your credit card and you don’t have a high enough balance, you can ask for your credit limit to be extended. However, if you are trying to spend more than you have and if you will consistently use a high percentage of youravailable credit, you might want to rethink your spending.
6. Checking credit limits
It can be easy to forget what your credit limit is, particularly if you have multiple cards. You can remedy this by calling yourcredit card company or by looking at your account online if you have an online account. Most credit card companies will also show you what your available credit is, as well as your balance. You can also look at your bill if you receive it in the mail. However, try to sign up for an online account if you don’t have one — having easy access to all this information can help you keep on track with your spending. Credit cards will usually let you go over your credit limit and then charge you a penalty charge, so should pay close attention to how much of your credit you are using.
7. Having a low balance to outstanding credit line percentage
As mentioned above, having an online account can help you keep track of how much you are spending and what your available credit is. Your credit utilization is based on how much of your credit you are using, and consistently using a small part of your credit maximum will help you improve your credit score. Experts disagree about what percentage is ideal, but the range is usually between 20 to 30 percent at most. The lower your average utilization risk is, the better your credit score will be. If you consistently spend too much of your available credit, you will be seen as someone who is at risk of defaulting on a loan.
Lenders look at several items when they determine whether or not to give you credit, and at what rate. They may consider your FICO score, how much debt you can handle based on your income, your employment history, and your credit history. You may be able to obtain credit even with a low score, but you will probably have to pay a higher rate than someone who has a high credit score. Improving your credit score will save you money in the long run.