Financial wellness can feel like a tricky subject. While saving more money and spending less can be a part of overall financial health, another crucial aspect of it is protecting and improving your credit score.
Though it might be overlooked, having a strong credit score can help you qualify for better loan rates, lower insurance premiums, and even improve your chances when renting an apartment. Thankfully, improving your credit score doesn’t have to be complicated.
Pay Bills on Time
Paying bills on time not only helps you avoid late fees, your payment history makes up the largest part of your credit score. For any payment reported to credit bureaus, having one late payment can have a major impact on your score.
The easiest way to stay on track is to set up automatic payments or reminders for all your bills. This includes credit cards, utilities, car loans, and even subscriptions.
Keep Credit Utilization Low
Credit utilization is the percentage of available credit you’re using. For example, if you have a $5,000 credit limit and a $1,000 balance, your utilization is 20%.
Financial experts recommend keeping this number below 30%, but the lower the better. Paying off balances more frequently, such as twice a month, can help you keep that ratio in check and show you’re managing your credit responsibly.
Don’t Rush to Close Old Accounts
It might be tempting to close old credit cards, but length of credit history is another major factor in your score. Older accounts demonstrate stability and experience handling credit. Unless there’s a high annual fee or a security concern, keep older accounts open, even if you don’t use them often. Making a small purchase occasionally to keep them active can also help.
Limit New Credit Applications
Though you’re keeping open old accounts, you still want to be careful opening too many new ones. Every time you apply for a new credit card or loan, a “hard inquiry” appears on your report and can temporarily lower your score.
Opening too many accounts in a short period can make lenders view you as risky. Instead, apply only for credit you truly need, and shop around for the best rates within a short window. Typically inquiries from credit applications often count as one if done within a 14 to 45 day timeframe.
Check Your Credit Report Regularly
Did you know you’re entitled to a free credit report each year from each of the three major bureaus: Equifax, Experian, and TransUnion? They’re available through annualcreditreport.com, and checking them regularly can keep credit score surprises at bay.
Review your reports for errors, such as incorrect late payments or accounts that aren’t yours. If you spot an error, you can dispute it right away. Even a small correction can boost your score.
Maintaining and improving your credit score is much easier when you know how simple actions can have a major impact. Space Age Credit Union offers numerous resources for credit management. Contact us today to find out more.
