Your credit score is a three-digit number representing how likely you are to repay debt. It is used by lenders, landlords, and others to decide whether to give you credit or enter into a lease agreement with you. A high credit score means you’re a low-risk borrower, which leads to better terms on loans and credit cards. A low credit score could make it harder for you to get approved for new lines of credit and may result in higher interest rates. So, if you’re looking to improve your credit score, here are some things you can do.
1. Check Your Credit Report for Errors and Dispute Any Inaccuracies
Your credit score is based on the information in your credit report. So, it’s essential to ensure that the information in your credit report is accurate. Mostly, the negative information will stay on your credit report for seven years. But, there are exceptions. For example, bankruptcies can stay on your credit report for up to 10 years, and tax liens can remain for up to 15 years.
If you find any errors in your credit report, you can seek help from credit repair companies. These companies will help repair bad credit by disputing inaccuracies on your credit report. However, some credit repair companies may use questionable tactics to improve your credit score.
2. Pay Your Bills on Time
One of the biggest factors that affect your credit score is your payment history. So, one of the best things you can do to improve your score is to ensure you always pay your bills on time. Late payments can harm your credit score and stay on your credit report for up to seven years.
If you’re having trouble paying your bills, you can do a few things to help. You can set up automatic payments, so your bills are paid on time every month. If the worst happens, check out this list of reputable credit repair services to help you get back on track. You can also sign up for text or email alerts that remind you when a payment is due.
3. Keep Your Credit Card Balances Low
Another factor that affects your credit score is your credit utilization ratio, which is the amount of credit you’re using compared to the amount of credit you have available. For example, if you have a $1,000 credit limit and carry a balance of $500, your credit utilization ratio is 50%.
Ideally, you want to keep your credit utilization ratio below 30%. So, if you’re trying to improve your credit score, one of the best things you can do is keep your credit card balances low. If you’re carrying a balance on your credit cards, try to pay it off quickly. And if you’re considering making a large purchase, consider using a different form of payment so that your credit utilization ratio doesn’t increase too much.
4. Use a Mix of Different Types of Credit
Your credit mix is another factor that affects your credit score. This refers to the different types of credit accounts you have, such as revolving accounts (e.g., credit cards) and installment accounts (e.g., auto loans).
A mix of different types of credit shows lenders that you can responsibly manage other types of debt. So, if you’re looking to improve your credit score, one thing you can do is to add a variety of different kinds of credit accounts to your credit report.
5. Keep Your Credit Accounts Open
The length of your credit history is another factor that affects your credit score. So, one thing you can do to improve your score is to keep your credit accounts open for as long as possible. Closing a credit card account will shorten your average credit history, harming your score.
Of course, some situations make sense to close an account, such as if you’re being charged an annual fee or trying to avoid temptation by keeping yourself from using a credit card. But generally, it’s best to keep your accounts open if you’re trying to improve your credit score.
6. Apply for New Credit Accounts Only When Necessary
One final thing to remember is that an inquiry is added to your credit report each time you apply for new credit. Too many inquiries can harm your credit score. So, if you’re trying to improve your score, you should only apply for new credit when necessary.
For example, if you’re planning on applying for a mortgage or a car loan, you shouldn’t apply for any new credit cards until after you’ve been approved for the loan. That way, your credit report won’t have any unnecessary inquiries.
Improving your credit score doesn’t have to be a long, drawn-out process. There are a few simple things you can do to give your score a boost. Remember to pay your bills on time, keep your credit card balances low, use different types of credit, and keep your credit accounts open. And when it comes to applying for new credit, only do so when necessary.