Raising your credit score rating is a lot like losing weight.
It’s not something that can happen overnight, and there is no such thing as a quick fix.
Your credit score is determined by your past behavior and not just what you are doing presently to address it.
So it will take a little bit of time to undo any damage that’s been done.
There are a few things you can do to help to build better credit so you can raise your credit score rating.
Keep An Eye On Your Credit Card Balances
One of the most significant factors in determining your credit score is how much credit you are utilizing.
In other words, how much credit do you have available versus how big your balances are?
Let’s say you have 3 credit cards and each one has a $1,000 LIMIT on them. That means you have $3,000 available to use.
You have a $500 balance on one, a $300 balance on the other and a $200 balance on the third. Which means your total debt is $1,000.
So, $3,000 total available to use, and you are using $1,000.
Divide $1,000 by the $3,000 and this is how much debt you are “utilizing”. In this case that equals 33% debt.
The smaller this percentage is, the better it will be for your credit score rating. You want to aim for a number of thirty percent or lower if possible because that will improve your score.
If you are paying down your credit card debt, you want to keep those balances as low as you can. If you don’t have credit card debt and continue to use your credit card, paying off the balance each month isn’t enough. Some issuers will calculate your debt ration by using the balance on your statement even if your balance is paid in full at the end of each month.
Debt On Your Credit Report Isn’t Always A Bad Thing
It is a myth that having past debt on your credit report is going to impact your credit score rating negatively.
After the car loan or mortgage has been paid off, many people will hop on the phone and try to get it removed from their credit report.
While negative debts are bad for your score, many of them will disappear when they have been inactive for five to seven years.
Eliminating old debt from your credit report is not always a good idea.
The debt you’ve paid off can improve your credit score, and a long history of good debt is great for your credit score.
Leaving previous debt and accounts that ended in good standing or with a good repayment record can also help your score because they show a consistent payment history.
Pay Your Bills And Debt On Time
One of the best things you can do for your credit score is to make consistent on-time payments.
If you are bad about remembering to pay your bills and don’t pay them on time, this will damage your credit and hurt your overall score.
This can even be over something as simple as library books or forgetting to pay your rent on time.
It doesn’t matter if it’s only a few days late, it will still greatly impact your score.
Try to set up “automatic” payments for as many bills as you can. James and I pay all our bills automatically because we have too much going on for me to remember to mail a check, or log in and pay a bill before it is due. They all come out of our checking account on the day they are due. So we get the added benefit of not paying them before the bill truly needs to be paid.
Opening And Closing Credit Cards
When it comes to your credit score, opening and closing lines of credit can impact your score.
If you don’t want to use a credit card anymore, and it doesn’t have an annual fee, cut it up instead.
Closing your account can hinder your score, and if it’s already low, you don’t want to do that. Having that card open will increase your available credit, which can help keep your percentage low (this is what we discussed above).
On that note, you also don’t want to open credit cards you won’t need just to raise that limit. This can backfire and put “hard inquiries” on your account. Hard inquiries will usually lower your score. So be cautious before opening another credit account, it’s a balance between being smart and being reckless.
Check Your Score Monthly
There is a fine line between checking your credit score too often and the right amount.
Your score will not usually change much over the course of a few weeks, but it can change a lot over the course of a month.
If you check your score monthly, you should be able to tell if anything has changed that would result in any large errors on your credit report. And this might help keep you motivated to continue to raise your score.
We use the Credit Karma app to check James and my score each month and make sure it hasn’t had any drastic changes.
Your credit score rating is one of the most essential numbers attached to who you are. It can determine what kind of interest rates you will pay for large purchases or if you will be approved for loans, and so much more. This is why it’s so important to make sure that you take good care of your credit score. If you follow these tips, you’ll be well on your way to raising your credit score rating. Once it’s been raised, take the necessary precautions to make sure it doesn’t get too low again.
YOUR TURN: How often do you check your credit score? Let me know in the comments below!
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