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Ways to Improve Your Credit Score
Your credit score is important for so many different reasons. It’s something that employers, landlords, and mortgage companies will look at closely when making decisions. If you’re just starting out and don’t have any credit history or have made some bad decisions in your life, there are ways to improve your credit score. Let’s take a closer look.
Get a Credit Card
If you don’t have any credit history, the easiest thing you can do to build credit is to get a credit card. The easiest cards to get are store credit cards. It might be a clothing store card or even a gas station credit card. Either way, these are the easiest cards to get. In the beginning, you may only get cards that can be used at that store. As your credit grows, you may be able to get store credit cards that have a MasterCard, Visa, or Discover card logo that allows you to use the credit card at other stores.
Make Small Purchases That Can Be Paid Off Each Month
The key to using a credit card to improve your credit score is to make small purchases that you can pay off each month. Just because you have a credit card doesn’t mean you should rush out and max it out. That’s the last thing you want to do. You want to keep your balance small, compared to your limit, and pay it off each month. This will also allow you to avoid interest charges on your purchases.
Pay Your Bills on Time
You also want to make absolutely sure you pay your bills on time each and every month. It may surprise you to learn that insurance companies, cell phone providers, and other service providers will report to credit bureaus. No matter what kind of bills you have, always pay them on time.
Increase Your Credit to Debt Ratio by Paying Off Debt
If you have credit cards already and want to improve your score, there are things you can do, such as making sure to pay your bills on time. Another great tip is to increase your credit to debt ratio by paying off your debt. If you have high balances on all your cards, this is really going to hurt your score. You want to pay off your debt, and stop making new purchases, so that you are using 20% or less of your credit limit. This means that if all your credit cards combined have a limit of $10,000, you want to have no more than $2,000 charged when you total all of your balances. If possible, you want to lower that amount to 10% so that you raise your score even more.
Stop Applying for New Cards
Last, but not least, if you already have credit cards, stop applying for new credit cards. It’s a huge mistake to apply for new credit cards on a regular basis. When you apply for a credit card, the company checks your credit score, which is considering an inquiry. The more inquiries you have, the more your credit score will drop.
It doesn’t matter if you’re fresh out of high school or are forty with ten credit cards, you can improve your credit score. It just takes time, patience, and good financial decisions.