Your credit score is one of the most essential pieces of information lenders use when deciding if they’ll lend you money. From issuing a credit card, to buying a home or applying for an apartment, the score follows you everywhere you go and offers a quick snapshot of your ability to make on-time payments when borrowing money.
A credit score may feel like an elusive number to you and one you don’t have much control over. The good news is though, you have numerous opportunities to improve your credit score in the short- and long-term.
Strategies for Improving Your Credit Score
You can start taking these steps today for improving your credit score:
- Pay bills on time: Start by catching up and paying all bills on-time, including credit cards, loans, and utilities and by the due dates. Late or missed payments can significantly lower your credit score and are reported every 30 days, which also means you can improve the score by making on-time payments.
- Reduce outstanding debt: Pay down existing credit card balances and loans as soon as possible so you lower your credit utilization ratio (the percentage of how much credit you’re using versus the amount of credit available to you). Aim for using less than 30% of your available credit on each card, if possible.
- Avoid opening new credit accounts: Try limiting the number of new credit applications you make, since each inquiry can temporarily lower your score. It’s best if you only open new accounts when necessary and after careful consideration.
- Keep old accounts open: On the flip side, maintaining older credit accounts is also key, even if you don't use them frequently. This is because the length of your credit history positively impacts your score and can improve it in the long run.
- Diversify your credit mix: This means having a variety of credit types (credit cards, installment loans, and a mortgage, for example) to show you can manage different forms of credit responsibly. However, you should also avoid taking out loans for the sole purpose of diversifying and only use credit as needed.
- Monitor your credit reports: It pays to regularly check your credit reports for errors or inaccuracies, which can occur more than you realize. If you find an error, dispute any incorrect information with the credit bureaus so you can get it corrected.
- Pay more than the minimum: Whenever possible, pay more than the minimum payment on your credit card balances, which helps reduce debt faster and shows responsible credit management.
- Set up payment reminders: Setting up a simple calendar reminder or enrolling in automatic payments can ensure you never miss a due date. Having consistent, on-time payments goes a long way in building a positive payment history and improving your score.
- Limit hard inquiries: Be careful of hard credit inquiries, which occur when lenders check your credit for lending decisions and take up to two years to come off your credit report. Too many hard inquiries in a short amount of time can have a negative impact on your score.
Managing your credit score may feel like a mystery, but you do have control. If you have questions about the impact of a loan from Space Age Credit Union with your credit score, then contact us today.
