5 Ways to Improve Your Credit Score
Your credit score is critical to your overall financial health. It can impact far more than just your ability to get a credit card — it can also impact your ability to get a new home, purchase a vehicle or even secure a new job. Even your car insurance rates may be impacted by a negative score. Yet many people are not sure what steps to take to increase their score.
It’s important to know consistency matters. Making wise financial decisions on an ongoing basis is what is going to provide the best long-term results. To do that, consider these methods:
1. Make Payments on Time
There is no more important step to take on a consistent basis than to make your payments on time. All credit-related payments, such as loans, credit cards and other payments, will impact your creditworthiness. A simple way to avoid late payments is to set up automatic payments. That way, you don’t have to worry about missing a deadline.
2. Work on Credit Limits
Having credit is important. Your goal is to have a low debt-to-credit ratio. Aim to use only 30 percent of your available credit at any given time. When you do this, you lower your risk level to investors and other lenders.
3. Get Help When You Need It
Whether you work with a credit counselor or turn to another source, help is available to you to minimize your risks and improve your long-term goals. Work to make a budget as a starting point. From there, create a debt repayment plan. Look for areas where you may be overspending.
4. Reduce Your Debt
As noted previously, a low debt-to-credit ratio is ideal. But if you are making just minimum payments each month on your debt, you may not pay it off for years. Instead, organize your debt by the interest rate. Pay down the highest interest rate debt first by putting as much as possible toward that debt each month.
5. Build Credit History
Opening and using credit is important. If you have no credit history, but you have steady employment, open a credit card account. Choose one with the lowest rate possible. Make a single purchase each month and pay off the debt in full.
You can take other steps to improve your credit as well. For example, you may wish to open new types of credit, such as a secured line of credit or a car loan, to show versatility. You also will want to minimize the number of card inquiries on your account (in instances where you’ve asked for a lender to provide you with a loan). By taking these steps, you will work to rebuild your credit over time.