It’s no secret that having a good credit score, sometimes called your FICO score, can open doors for you. Obtaining a mortgage, renting a car, ordering online… all these activities typically require a credit card. If your credit score is low, it’s often tough to get a credit card or to qualify for a mortgage with a decent interest rate. Most people don’t know that there are a few simple things you can do to boost your credit score. Let’s take a look at some of them now.
#1 Pay Your Bills on Time to Raise Your Credit Score
A good payment history is key to maintaining a good credit score over the years. If your record of paying your bills is a bit spotty, start now, and resolve to make your payments on time! Start a new habit of keeping track of when they are due, and make sure that checks are sent on time, or pay your bills online or through your bank.
If you’re behind on anything, try to catch up as soon as possible.
#2 Keep Your Credit Balances Low to Improve Your Credit Score
Watch your “credit utilization rate,” which is the ratio of your balances to your credit available. It’s a bit confusing, but the truth is, credit that you don’t use benefits you and raises your score. Charging your credit accounts higher and higher throws up a red flag to creditors.
If you know someone that uses credit responsibly, see if you can become an authorized user on their account. Don’t charge anything, but maintain the authorized user status, and your credit utilization rate will change.
#3 Don’t Close Accounts After You Pay Them Off
It’s human nature… After you pay off an account, you’ll want to close it out and avoid the temptation to start charging again. But remember, it’s helpful to your credit score to keep the account, as long as you don’t run it up! This will reflect available credit that you are not using and boost your credit utilization ratio.
This is a big deal… Your credit utilization ratio accounts for 30% or your FICO, or Credit score!
#4 Don’t Apply for New Accounts
Some people mistakenly think that the more credit they have, the better their credit looks. If you’re trying to improve your score, it’s essential to remember that every time you apply for a new credit account, a hard inquiry is noted in your credit file. These will lower your score over time. So, work with the credit that you have, and try to reduce your ratio within those parameters.
Repairing Your Credit Score is a Long Game
Don’t expect to fix your credit score is a few days… it takes a while, especially if you’ve got negative information in your file. If you follow the advice in this article, you will start moving things in the right direction.
If you need help with your credit file or have any questions about this information, contact me, John Bolden, at Bolden & Little, LLC. I’ll be happy to answer questions you may have.