Low credit scores can trip you up when trying to get a car loan, a personal loan or even an apartment to rent. The good news is that there are ways that you can increase your credit score. It begins with wanting to improve your credit score, and then takes some self-discipline, determination, and focus. You will have to be proactive and most likely have to sacrifice your time and effort. To help you on your way, here are a few tips to increase your credit score. Some may help you sooner than later, but all will help improve your score to a level that will be beneficial to you and your family.
Tip #1: Pay Your Bills On Time
The first tip to increase your credit score, and one of the fastest ways to improve it, is to pay your bills on time. The record of your ‘Payment History’ makes up 35% of your credit score. Pay your bills on time and your credit score goes up. If you miss payments or make late payments your score goes down. Your goal should be to get current and stay current. If you have had credit problems in the past they do count, but they count for less now. Old problems affect your score far less than your current status. Focus on paying your bills on time now, and it will improve your score from now onward.
Tip #2: Manage Your Debt
‘Amount of Debt’ accounts for 30% of your credit score. Too much debt, like four or five credit cards with balances above 50% of their limit or along with several installment loans, i.e., car loans and mortgages, is a sign that you’re living beyond your means, and are a credit risk. Focus on paying off credit cards. One at a time: lower balances first, and then the larger balances second. Managing your debt may mean getting a second job for a few months to pay it down, but in the long run it will be worth it to you and your family.
Tip #3: Keep Credit Cards Open
When you pay off a credit card do not close the account. Having an account paid in full on your credit report is a good thing. It adds to your ‘Credit History,’ which accounts for 15% of your credit score. You may have taken that second job to pay off three credit cards. With all that time and effort, you don’t want to lose that credit history now. Keep all three open, but use only one instead of cash, and use your cash to pay that credit card off once a month.
Tip #4: Maintain Diverse Credit
Have several types of credit, past and present, on your report. A ‘credit mix’ on your report accounts for another 10% of your credit score. These different types of credit are a mix of installment loans, such as a student loan or a car loan, and revolving debt, such as credit cards. Pay the loans on time and keep the balances low on the cards. This will increase your credit score.
Tip #5: Fix Credit Report Errors
One of the fastest ways to improve your credit score is to fix the errors on your credit report. Credit bureaus, including the three largest—Experian, Equifax and TransUnion—are all guilty of misreporting information on your credit reports. Credit reports can be acquired free of charge every 12 months. Use such services as AnnualCreditReport.com to request reports from the big three and then check them for mistakes or negative information that is too old or is not yours. You can file a dispute to have it corrected. Once it is done, it will improve your score within 30 days.
Tip #6: Check Your Credit Score Sparingly
Limit your ‘Credit Inquiries.’ Every time you apply for a loan or credit card, a credit report is run on you to determine your risk, and each time it shaves points off your credit score. This happens frequently when car shopping. Each time a car dealer runs a report to see what kind of loan you qualify for it lowers your score. If you car shop over a few days, credit bureaus are supposed to only count those credit inquiries as one, but it is something you should monitor (see Tip #5).
That wraps up our 6 tips to increase credit score. Want to learn more about boosting your credit? Contact the team at Tio Rico today for information about personal and auto loans.