Your credit score is a big deal! If you need to know how to improve your credit score, we've got some tips on the dos and don'ts to help raise your credit score so that you can be financially successful!
Debt. Most of us have been there in some form or fashion! While some debt can be good for you (because how else are you supposed to build credit, after all?), too much debt can wreak havoc on your credit score.
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Never fear, Freebs! After you're done reading this post, you'll know how to improve your credit score. You'll have a game plan figured out and be prepared to start on some good habits to raise your credit score. So let's get to it, shall we?!
HOW TO HELP IMPROVE YOUR CREDIT SCORE
There are a lot of things that you can be doing that will help to improve your credit score. But remember, it takes TIME to raise your credit score. So don't expect to do all of these things and then see instant results!
CREATE A PLAN TO IMPROVE YOUR CREDIT SCORE
The first thing that you need to do to help improve your credit score is to come up with a plan! If you're in debt, then you need to come up with a budget if you don't already have one. This will allow you to make a plan for all of your money and know exactly where it's all going. Doing so will also let you know how much money you have left to put towards paying OFF that debt!
If you need help to figure out how to pay down your debt and improve your credit score, then check out Budget Bootcamp! It's a fun video program that will help you to whip your wallet into shape and tackle your finances.
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PAY ALL BILLS ON TIME
Start paying all of your bills on time, not just your credit cards and loans. Paying your credit cards and loans will obviously help to improve your credit score. But make sure that you're also paying your rent, mortgage, utilities, cell phone, and any other bills on time, too! This will help you when it comes time to apply for a future line of credit since it will show future creditors that you are reliable when it comes to paying your bills.
Late payments are REALLY bad for your credit, they will stay on a credit report for 7 years! The only good news is that their impact on your credit score does go down as time goes on.
The biggest tip that I can give you for paying your bills on time is to set up reminders! Put the due dates on your calendar and set up reminders in your phone. Or better yet, set up automatic payments so you don't have to remember to pay each month – although it is a good idea to check and make sure these payments go through correctly on a monthly basis! Automatic payments are only a good idea if you know that you will have the money in your account.
IMPROVE YOUR CREDIT SCORE BY PAYING DOWN DEBT
This one is probably a given, but it's so important! If you have pressing debt (anything that has an interest), then you need to focus on getting those lines of credit in control. Are you thinking to yourself, “Where in the heck do I even start with paying down debt?” Have no fear, I've got your back! I've got 3 simple steps that you can start doing TODAY that will help you to get out of debt, so make sure that you go read about them.
A big tip for paying down debt is to make extra payments towards your pressing debt! When you put extra money towards a loan or credit card, you're paying on the principle rather than on the interest. Just paying an extra $20, $50, or $100 a month can really help you to chip away at that debt!
CREDIT UTILIZATION RATIO
Once you've got your debt under control (woohoo, party time!!!), it's time to make sure that your credit utilization ratio is in the green, too. The credit utilization ratio is how much you owe on all of your lines of credit compared to how much you have available to borrow over all of your lines of credit.
In order to improve your credit score, you want to keep your credit utilization ratio at or below 30%. Let's do a little bit of easy math (shhh, don't tell my college calculus professor!) to help you understand this a little bit better. If your total amount of credit available to use is $10,000, you only want to be borrowing a maximum of 30%, which would be $3,000. This means that you should only ever be borrowing $3,000 total over all of your lines of credit.
REPORT ERRORS ON YOUR CREDIT REPORT
Every 12 months, you can get your credit report for free from the big 3 credit bureaus (Experian, Equifax and TransUnion). Some credit card companies will also generate this for you for free. But did you know that you could report any errors that you find on your credit report? This is an easy way to improve your credit score if you do find any mistakes.
IMPROVE YOUR CREDIT SCORE BY STAYING AWAY FROM THESE
Alright, so we've gone over the dos of improving your credit score. Now it's time to go over the DON'TS.
DON'T CLOSE UNUSED CREDIT CARD ACCOUNTS
Unless you just have a really good reason, don't even think about canceling a credit card account! Just cut that bad boy up and don't blink an eye at it anymore. Remember the credit utilization ratio that we talked about? Even if you're not using a credit card, that's still a line of available credit that is being factored into your credit utilization ratio.
When you close an unused credit card account, that lessens your amount of available credit. If you're using right at 30% of your ratio and close an account, then you will definitely go over and your credit utilization ratio will be all out of whack.
Now, if these unused credit cards are costing you a yearly fee and if you're not close to using 30% of the ratio, then you could consider closing it. Just be smart when you're making decisions like this that will impact your credit score!
DON'T APPLY FOR NEW LINES OF CREDIT
When you apply for a new line of credit, it will show up as a hard inquiry on your credit report, which dings your credit score and will lower it. If you have a good credit score, it won't affect your score that much. But if your credit score is already low, you don't need anything that will make it go lower. A hard inquiry will stay on your credit report for 2 years.
If you apply for multiple lines of credit, that is multiple hard inquiries that will have a greater impact on lowering your credit score. So while it may be tempting to apply for a new credit card to help out with your credit utilization ratio, know that it is going to have a negative impact on your credit score!
DON'T OPEN MULTIPLE ACCOUNTS AT A TIME
Opening too many new accounts in a short amount of time is also a red flag for lenders. It tells them that you may have credit problems and makes it harder for you to get a loan. So really think through before you apply for a new line of credit and wait at least 6 months before you open another one.
Okay, well there you have it! You now know how to improve your credit score and can get started on rebuilding your credit. Good luck and let us know if you have any questions in the comments!
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