Did debt get the best of you this past year? Many people will be making financial New Year’s Resolutions – will you be one of them? If your goal is to raise your credit score next year, here are some tips to help you reach your goal.
- Make sure your reports are accurate. You can order one free credit report per year from each of the three main credit bureaus, Experian, Equifax, and TransUnion. Once you have these, be sure to go over them carefully to make sure the report is accurate. It there are errors, you could have a lower score than you deserve.
- Figure out what’s holding your score down. There are five main areas your credit score is made up of: amounts you owe, new credit, length of credit history, payment history, and credit mix. It’s important to know which of these categories you’re falling short in so that you can focus on those areas. If your score is low because you’ve never had credit, get some. If your debt is too high, lower it.
- Create a roadmap to a higher score. You can’t figure out where you’re going if you don’t have a route. Do some research and create a plan. Write down the necessary steps so that you can check them off as you go.
- Get organized. If late or missed payments are a problem, you’ll need to get on a schedule for paying back loans and credit card bills promptly. If the due date doesn’t work with your pay schedule so you’re late every month, call the company and see if they can move it. Set alerts on your phone if you just keep forgetting to make your payments. Be honest with why you’re missing the deadlines and then find a way to make them next time.
- Don’t open new accounts. Every time you apply for a store credit card to get that discount at checkout, your score gets dinged a bit. It’s not usually a huge amount, maybe just a couple of points, but it can mean the difference between credit tiers and it can stay on your history for up to a year. If you don’t need it to build your history, don’t apply for it.
- Use less credit. While utilizing credit and paying it off is a great way to build a credit history, if you use too much credit, your score will suffer. Using more than 30% of your credit will hurt your score, even if you pay it off each month. Aim for using less than 10% of your available credit to have the best score.
- Get a secured credit card. If you’re score really needs a boost and you are not able to get credit due to a low score, consider a secured card. Basically, you put money into an account and then that card is “secured” by the deposit you made. This will allow you to use a credit card when you need to and build a good payment history to get you back on your feet.
Improving your credit score can take time, but by carefully following these steps, you can start to see an improvement. The higher your credit score, the more opportunities you’ll find!
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