Lauren Cobello » Get out of debt » How to Improve your Credit Score
A credit score is the new “in” thing. Everywhere you look, companies are giving away free credit scores. If you have good credit, you probably don’t think about it too much. But more than a third of Americans have a “fair” or “very poor” credit rating. If you are included in the third of Americans, you probably want to know how to improve your credit score.
You might not think it matters too much. After all, if you’re not in the market to buy a house or apply for a loan, and you may be wondering why does a credit score matter?
A credit score is used more often than you know. Some employers run a credit check as part of the interview process which means having a low score could cost you that job you wanted. Insurance companies also factor your score into the premiums you pay. A high credit score could save you money on auto and homeowners insurance. Want to improve your credit score? Here’s how!
Before you improve your score, you need to know where to begin. This is the easy part since there are plenty of free ways to find your credit score.
Credit Sesame is a top choice for free credit scores. It takes less than a minute to create your free account and access your credit score – no strings attached. Your account comes with free credit monitoring so keeping tabs on your score is a piece of cake.
Plus, Credit Sesame gives you free identity theft insurance just for signing up. With identity theft on the rise, this is a huge peace of mind.
To have a credit score, you must have credit accounts. Opening a new line of credit could raise your credit score on its own. Apply for a credit card or see if you can get a loan from your bank to jump-start your credit history.
If you don’t have a solid credit score, this might be tough. Look into a store credit card or a secured loan if you’re struggling to get approved.
Now that you know where you stand, it’s time to improve your score. Since your credit score uses information from your credit report, the first step is to check your credit report for errors. Your credit score could get an instant boost by correcting any wrong information on your report.
To get your free copies, head to AnnualCreditReport.com. That’s the site authorized by the federal government so it’s safe to use.
Remember that your credit report differs from your credit score. The two are closely related but your credit report doesn’t include your credit score, which is why having a Credit Sesame account comes in handy.
If you find something on your report that doesn’t look right, file a dispute immediately. Continue to check your credit reports to monitor things. Credit Sesame’s credit monitoring and ID protection make it easy to know what’s going on.
How much debt you have has an impact on your credit score. The balance of debt compared to your credit limit is known as “credit utilization” and it makes up 30% of your overall rating.
The higher your credit utilization, the lower your credit score – which is why paying down debt can cause a big surge in your credit score.
If you ask for a credit limit increase, you change the ratio of the amount of credit you’re using compared to what you have available. And this can improve your credit utilization and boost your score.
Let’s say you have a $5,000 balance on a credit card with a $7,000 limit, making your credit utilization 70%. If you can increase your credit limit to $10,000, your credit utilization drops to 50% which can help your credit.
Your payment history makes up 35% of your credit score, which means improving your score could be as easy as making payments on time.
While you can’t go back and change the late payments already on your report, commit to always paying on time from now on. One of the simplest ways to never miss a payment again is to set up autopay on your credit accounts.
This is one mistake I watch people make often. Do not close your accounts once your balance is paid off! Keeping your credit accounts open even if you’re not using them is smart. Your “length of credit history” has a lesser impact on your score but it still matters. Plus, closing accounts lowers the amount of available credit you have, affecting your credit utilization and lowering your credit score.
The only way this isn’t a good idea is if you have a spending problem and buy things you don’t need. In this case, simply cut up your card but keep it open. This will prevent you from using it but still give you the credit utilization benefit. Buying on credit if you can’t afford to pay cash might feel good at the moment but it can backfire. As you add more debt, making minimum payments can become a struggle.
This is a new program where you can boost your credit score by paying your regular bills on time. Experian Boost will give you credit for paying your phone and utility bills and give your credit score a nice boost immediately.
Unlike credit repair companies, Experian Boost is completely free and can increase your credit scores fast. Credit repair may cost you thousands of dollars and only help fix inaccuracies, which you can do yourself for free. Piggybacking services that add you to a stranger’s account are risky and considered deceptive by lenders. Raise your credit scores securely with Experian Boost.
Credit scores are nothing more than a measure of how well you manage debt. If you’re overspending and missing payments, your credit score will suffer. Improving your credit score is possible with a little discipline and a lot of practice.