How to Increase Your Credit Score
Regardless of the amount of money you make, your credit score can affect you financially, whether you’re applying for a new credit card or even trying to get approved for a new home loan. It can be the difference of actually getting approved, and even getting lower APR rates. If your score is too low you could end up paying upwards of tens of thousands of dollars more for your new home (depending on the term of the loan).
So what can you do to increase your credit score and ensure that you save some money on your next purchase? There are a few ways, so let’s discuss them below. Before you get started be sure to pull your credit report. We suggest a service such as CreditKarma or CreditSesame, as both are free and easy to use.
Compare Your Score
Now that you know what your credit score is, how does it measure up? If you’re using any of the services listed above you should have seen your score and gotten a good idea of what the averages are in your state or throughout the country. Where does your score measure you at?
Your ultimate goal should be above 750, although anything above 701 is considered “good” by most standards. However, right now you may be far below that, so stick with the basics and shoot for a goal of 50 points over the next 3-4 months. There’s no guarantee here, but it could happen if you follow the advice below.
Look for Discrepancies
If your score is low there are probably negative items on your report. The first question you’ll need to ask yourself is are they accurate? Many people believe they have items that do not belong to them listed on their report. This is true in many cases. Figure out what’s yours and what’s not, then make notes of the items that do not belong to you.
In fact, most services have some sort of credit report card that shows you any issues that may be causing your score to be low, from late payments to high credit utilization. Make sure you look closely at these reports to see if anything sticks out to you, then add them to your notes so that you can take action. You will most likely see ‘grades’ lower than A on your ‘report card’ within these services, so you need to figure out why these grades are so low.
Take Action Today
Now that you’ve taken a good look at your report and took notes, it’s time to act now. If you’ve noticed some negative items appear on your report, then do your best to dispute the negative items, starting today. It’s important that you take action immediately so that you don’t waste any time, as time is important when it comes to improving your credit score.
Start learning how to dispute those errors (link above) and you’ll find your credit will improve quite drastically over a short period of time, if you have a lot of errors. Pay off any outstanding payments, but be sure to work out a deal to ensure that these items are removed by that company, if at all possible.
Next, be sure to look at things such as credit utilization. It’s important that you cut down on utilization by paying more money down on each credit card payment. The utilization percentage should be at 20% or so. Anything higher is going to affect your score, and in some cases it will affect it quite a bit. Pay more money and watch your score slowly move upwards.
How are the inquiries on your report? Be sure to do your best to not accumulate too many hard inquiries, especially in a short amount of time. While soft inquiries won’t affect your score, hard inquiries WILL affect your score. Don’t hurt your credit anymore than you already have.
Open new accounts if you can afford them. This means financially and based on your credit. If you believe you will get denied for the account, don’t do it. If you’re going to open up a new secured credit card, do it. These new accounts will improve your credit score IF you do not go over 10-20% utilization.
Use the card to purchase gum, snacks or whatever is cheap and then pay it off each month. This will help improve your score by having a new tradeline (account) and utilizing that line of credit monthly, while making each monthly payment on-time, each month.
Monitor Your Score Constantly
Keeping an eye on your credit score is by far the most important thing you should be doing, especially once you start cleaning up your report. You don’t want anything to pop up and surprise you when you go to purchase a new car, home or even apply for store credit at your favorite shopping boutique.
Keeping a close eye on your score by using CreditKarma or CreditSesame is extremely beneficial for you and your family. If you feel that this information has helped, please be sure to share it with your friends or family!