From helping you acquire a loan at its best terms and interest rates, to potentially saving money on utilities and influencing how much your life insurance rate will be, a good credit score is crucial for your overall financial stability.
The following are 8 ways that can help significantly raise your credit score :
1. Check your annual credit reports
Most Americans neglect checking their credit reports. This is an important habit to develop, especially if you’re concerned about building a good credit score. Checking your credit reports allow you to assess your credit history and check for any discrepancies along the way.
2. Understand your credit risks
Building a good credit score means you need to educate yourself about your credit risks. Keep in mind that anyone can be a victim of fraud, so check your credit reports to guard yourself against identity theft or unknown sources of debt. As soon as you notice any inaccuracies on your report, work on getting them cleared up as soon as possible.
3. Make it a habit to pay your bills on time, all the time
Your payment history can have a big impact on your credit score. Lenders typically won’t lend money to borrowers with a poor history of payments. Delinquent payments can drag your credit score down by as much as 300 points.
4. Open a credit card, if you don’t have one yet
Having a well-maintained credit card that you use for responsible purchases can help increase your credit score. If you keep your credit card use in check, and make on-time payments each month, it will do wonders for your overall credit score.
5. Resist the urge to open new credit accounts unless really necessary
While one or two credit cards can be helpful if you want to build up a good credit score, opening multiple unnecessary credit cards does just the opposite. When you have multiple credit cards, it’s a lot more tempting to make impulsive purchases and accumulate debt that can seriously hurt your credit score.
6. Don’t spend beyond your credit limit
Keep your credit card balances low and don’t go over your credit limit. When you apply for new credit, lenders often look into your “credit utilization ratio” first, because it’s an important part of how your credit score is calculated. Your credit utilization ratio can be found by dividing your overall credit card balances by your overall credit limit. Having a low credit utilization ratio means you have not maxed out or exceeded your credit limit.
7. Existing Debt Management
If you have an existing student loan, work on minimizing your outstanding debt. Develop a plan to get any existing debt paid off as soon as possible. The less debt you have, the better off you’ll be.
8. Take care of your late payments
Instead of transferring your debts repeatedly to new accounts, take care of them right away. Contact your creditors to negotiate ways to be debt free faster and with lower interest rates if possible.
How Long Does It Usually Take to Raise A Credit Score ?
Rebuilding a negative credit score can take time depending on the reasons behind the poor score. Delinquencies or late payment can stay on your record for up to seven years, while hard inquiries can stay for two years. Bankruptcies can also stay on your report for up to 10 years.
While building a good credit score won’t happen overnight, having a bad credit score could haunt you forever. Take charge of your credit score and deal with your debt as soon as you can. Find the best credit repair plan that will work out for you. Keep yourself educated regarding your accounts and credit scores. Lastly, be sure to handle your finances responsibly to improve your financial health.
You may overlook the importance of having a good credit score, however maintaining good credit is crucial and can open doors for you in the future when it comes to your finances.