7 Ways to Improve Your Credit Score and Why It Matters
Credit scores matter today. If you have a credit score that’s considered good or better, you’ll likely see the benefits in various areas. For example, you’ll likely pay less interest on the mortgage loans or car loans you obtain. You may qualify for a loan that you would not if your score was lower. And, credit scores actually play a role in vehicle insurance rates and employment screenings. Considering this value, how can you improve your score?
- Make payments on your loans on time every month. This is the most important factor in determining your creditworthiness.
- Don’t open too many new loans. Aim to open no more than one or two loans, credit cards, or other accounts in any given six month period.
- Work to pay down your balances. When you reduce your credit to debt ratio, you show lenders you are a responsible borrower, increasing your credit score.
- Don’t be afraid to use credit. You cannot build credit without actually using it. If you want to keep your balance low, pay it off every month. Even minimal use is acceptable.
- Don’t close old accounts. The length of time you’ve been using credit matters as well. Closing older accounts removes them from your credit report, shortening your experience.
- Settle any collections sooner rather than later. Any type of derogatory action on your credit report is going to hurt. Keep your bills as current as possible.
- Check your credit report often! It’s a misconception that checking your own report worsens your score. Doing so yourself gives you the ability to ensure the information is accurate.
Taking these simple steps now can make a big improvement in your credit score over time. It can take time to build up your score, but anyone, at virtually any level, can do so with smart buying decisions and good financial management.