Consumers who know the value of their credit score will work hard to maintain a great score from day one. Those who never learned the importance of their credit score might make financial mistakes that cause them to learn the hard way.
Whether a person is building their credit score for the first time or working diligently to rebuild it after making a few mistakes along the way, they should know what works best and how to make the biggest impact. There are certain things consumers can do to build a great credit score, and they’re all right here in this detailed blog post.
Are you in the market for a new home or perhaps a new car? Maybe you’re hoping to get a home improvement loan? If you are considering any of these, you may want to check your credit rating first. Your credit score (also called credit rating) is a number from 300 to 850 which corresponds to your perceived creditworthiness. Your credit score takes into account a number of factors, including the amount of debt you are carrying, how many sources of debt you have, and any accounts that are not in good standing (missed payments).
Lenders and credit card companies take your credit score very seriously. A poor credit score can derail a loan process. Even if your credit is decent, if you improve your credit rating you may get a better interest rate on a loan. If you need help improving your credit score you have several options. However, it’s important to keep in mind that all of the options take some time.
What you can do to improve your score:
Check Your Credit Report –
Your credit report is the record from which your credit rating is determined. There are government agencies who allow you to check your credit report for free once a year. Go to: https://www.annualcreditreport.com to obtain your free report.
It is a good idea to check your credit report at least once a year, even if you’re not in the market to borrow. Take a careful look at your credit rating to see if all information, such as married name or a new address, is current. Also, check to see if there are any errors on your report. Errors on your credit report should be disputed immediately. Once the error is removed, it should have a positive impact on your credit rating.
Second, if you can, you should pay down any existing debts as much as you can. Lenders look at how much you owe and how many of your credit cards are maxed out. By eliminating some of your existing debt you can improve your credit rating.
Maintain Impeccable Payment History –
The best way to build a great credit score is with on-time payments. It seems like common sense, but it’s easy to forget and that’s how many consumers end up in trouble. Instead of relying on a list or memory to help make payments on time, consumers should schedule automatic payments from their accounts each month. This helps ensure all bills are paid on time.
There are other things that you can do over time to improve your credit score. One great way to bolster your credit rating is to always pay your bills promptly. If you’re having a period of difficulty, do not just ignore your creditors. Let them know your situation and ask if some arrangement can be made to help you until circumstances improve. Also, if you wish to build up your credit rating it is not a good idea to apply for several new loans or credit cards all at once. This gives a negative impression and hurts your score.
Uphold Low Credit Utilization –
The best way to keep a score high is with low credit utilization. The average consumer carries some serious debt, but it’s better to keep credit utilization at or below 30% of the available balance. It’s also important to remember that canceling old accounts can hurt this ratio if consumers are not careful. Canceling an old card that goes unused can take a utilization ratio of 30% and make it much higher, which causes scores to drop suddenly.
Correct Mistakes On Your Report –
Debt isn’t always a negative if it comes in the form of a home or even a car since consumers often need one to get to and from work. However, debt on a person’s credit report that should have been removed, that isn’t their own, or that’s improperly labeled can cause serious problems. Checking credit reports annually is a good idea, but checking them quarterly is a great idea. All of the major credit bureaus are required by law to provide consumers with one free credit report each year, and no consumer should ignore that.
If a consumer finds mistakes on their report, they might notice their score is low. These mistakes can be easily fixed by contacting the credit bureaus and proving this information is incorrect. Once that is done, consumers often see their scores rise and improve.
Do Not Apply for Multiple Cards At One Time –
One mistake consumers make when trying to build and maintain a good credit score is taking advantage of deals. For example, take a consumer who goes shopping on Black Friday to save money on Christmas purchases. Many of the stores they visit offer an even bigger discount on purchases if they apply for the store credit card. It might seem like a great way to save some serious cash, but it’s bad for a consumer’s credit score.
While one credit inquiry won’t affect a person’s credit score very much, multiple inquiries in a short period of time will do just that. They will show up on a person’s credit report and lower their score by a few points or more. It shows potential creditors that the consumer seems desperate for some cash, and it can make them shy away from wanting to provide credit to those consumers.
Building a good credit score takes time, but it’s entirely possible for people to do this by making on-time payments, lowering their debts, and making sure they’re able to keep track of their scores. It’s the best habit to get into, and it’s one that affects someone’s entire future. They’re little life changes, but they’re impactful.
Just like Rome, a good credit rating will not be built in a day. Keep working at it, and over time you can build up your credit rating by following the tips listed above. Good luck!