The average American credit score has been going up. Last year, the average American score hit 700.
Why do you need a good credit score? It helps you get loans, save money on interest rates, and could help you get the job!
Damaging your credit score can happen – we’ve all been there. Good news is that we can fix it!
Learn 5 easy ways to repair your credit score and achieve the credit score you want.
What is a Good Score?
Before we start talking about improving your score, you should know your goal.
Credit scores range from 300-850. In general, a FICO Score above 700 is good. A score over 800 is exceptional.
If you get above 720, you may qualify for some of the more favorable loan terms that will save you money.
The main factors that determine this score include:
- Total debt
- Payment history
- Type and age of accounts
- Credit utilization rate
- Public records like bankruptcy
- Number of inquiries
Your credit score does not depend on your age, income, race, where you live, or your marital status.
You are not bound to your score forever. Over time, you can improve your score, so don’t be discouraged. Here’s how.
1. Pay on Time
One of the biggest factors of your credit is paying your bills on time. Your score simply reflects that you can pay on time.
If you pay a bill 30 days past its due date, your score could go down anywhere from 100 to 300 points. That’s a lot!
Lenders want to know that you can pay your bills – and pay them on time!
Set up automatic bill pay if you regularly forget to pay bills. Just make sure you have enough money in your account.
If it’s helpful, get a calendar and write down all the due dates. Be sure to check it regularly or put it someplace easy to see like on the fridge.
2. Watch Your Credit Card Balances
Another major factor in your credit score is how much revolving debt you have in relation to how much you use. You want this percentage to be lower than 30 percent for a better score.
For multiple credit card balances, you may want to consolidate them into one personal loan to help your score. Having multiple balances on different cards could hurt your score no matter how low they are.
Even if you pay your balances off every month, it may not reflect how much of your credit you utilize. This is because the creditors see the monthly balance of your account before you pay.
To avoid this, you could make multiple payments a month or pay before the cycle ends so your monthly balance is 0. You can even pay off each purchase like using a debit card – or pay weekly. This can help you manage how much you charge.
Also, you should just move your debt around to different cards. Work on getting rid of it.
3. Leave Old Debt Be
Just because you don’t have that debt anymore doesn’t mean you shouldn’t still have it on your credit report. You want to show that you paid them off because it shows your responsibility.
Most negative items will disappear in seven years. Old debt is good debt because it has been paid and can improve your score.
You probably have a solid payment record on those accounts since it is paid off. You want creditors to see that.
4. Know Your Credit Risks
You should check your credit report once a year. This is free! You can check once a year from each one of the credit reporting agencies – Equifax, Experian, and TransUnion.
You want to check your credit report for any errors. A recent study by the Federal Trade Commission found that 1 in 5 people had errors on their credit reports.
You will not see your score on this report though. You can see your score different ways.
Credit.com and Credit Karma offer a free simulated score. Your credit card company may also offer monthly credit score updates. This at least gives you an idea where you stand.
If your credit needs additional repair and you feel you need more help to understand your risks, contact The Credit Review.
5. Open a Credit Card if You Don’t Have One
Be careful here. You only need to use one or two responsibly for a better score.
Make one small purchase on this card monthly and pay it off. It shows you can be responsible.
Applying for credit when you need it is not a bad thing. However, if you have a bad score and plenty of credit cards, don’t apply for more credit. This is only for those who don’t currently have a card.
Each time you apply for new accounts, your credit shows an inquiry. Too many inquiries in a short period of time could hurt your score.
If you don’t qualify for an unsecured card, you can apply for a secured credit card. This card is similar to an unsecured card but you put down a deposit to open the account. If you pay on time each month and pay your balance, the creditor will return your deposit when you are finished with the card.
Improving Your Credit Can Take Time
If you need to rebuild your credit score, be patient – it takes time. Wondering how to maintain good credit? You need to pay your bills on time and use your credit wisely month after month.
In the long run, your score will show your smart and responsible spending practices. Good scores don’t happen overnight, unfortunately.
The positive effects of new credit cards and paying on-time can take months to show up on your credit report.
This is why it’s best to start improving your score as soon as possible especially if you know you need a car loan or mortgage in the future.
Curious About Other Things?
You were curious about improving your credit score – now let’s help you explore your curiosity on curiosityhuman.com.
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