Your credit score plays a significant role in your financial well-being. A poor credit score could stand between you and your dreams, like purchasing a new home or vehicle. Fortunately, there are ways you can steadily improve your credit score so you can get your financial journey back on track. Read on to find out what you can do to obtain a good credit score.
Get to Know Your Credit Score
The first step in knowing what you need to do to improve your credit score is to know your credit score. You can access your full report for free, once a year, from annualcreditreport.com. Another helpful, and free, tool for understanding your score is Credit Karma. Monitoring your score regularly can help you understand what factors and actions hurt or improve your credit score.
Why Your Credit Score Matters
Your credit score is one of the most important tools you have when it comes to achieving your financial goals. For instance, purchasing a home, getting an auto loan for a new car, borrowing to make home renovations, and being approved for any other line of credit is dependent on having an acceptable credit score. Plus, you can sometimes qualify for better interest rates with a higher credit score, so it’s best to shoot for a great score over an average one.
Improve Your Credit Score
Now that you know your credit score, and the benefits of having a good one, it’s time to dive into what you can do to increase it. First, it’s worth mentioning that there is no quick fix; by design building a good credit score takes time and financial responsibility. Here are the actions you can take to start steadily enhancing your score:
Paying your bills promptly is one of the easiest ways to help your credit score. Over time, this expression of financial responsibility will help your credit score climb higher. This includes your credit card bills and any loan payments you may have as well as your standard utility bills.
Make sure that you aren’t using a high percentage of your available credit. The amount of your credit that you typically use proportionate to your total available credit is a contributing factor to your score. By using a low amount of your available credit each month, you can help your score. Also, it’s wise to never spend more than you can afford to pay back in the next billing cycle. Paying your balance in full each month not only helps you avoid interest charges, but it also contributes to good credit habits.
One of the best things you can do to better the health of your credit score is paying down any debt that you have and avoiding new debt. The less total debt you possess the better your score will be. This means that paying off more than the minimum payment each month can go a long way in obtaining a great score.
Along with the actions that have a positive impact on your score, come actions that can have a negative impact, or decrease your credit score. These are called derogatory marks. These are actions such as late or missed payments, debt collections, bankruptcy, and applying for multiple lines of credit all at once; just to name a few. Another negative action is closing unused credit accounts. This has a damaging effect on your credit score, so it’s best to let the account continue to be unused instead of closing the account.
Building or rebuilding an above average credit score takes time. You need to consistently take the actions that help raise your score. If you fall back into (or start) bad credit habits, it will take even longer. However, the impact of negative actions or derogatory marks in your past will start to decrease while you continue your new positive habits.
Stay Consistent and Disciplined
Building a strong credit score, regardless of your past credit history, takes effort and consistency. Still, it’s something that anyone can do successfully by following the guidance above to actively change their credit habits. So, if your credit score isn’t where you’d like it to be there’s no need to panic. By remaining consistent in financially responsible credit behavior, you’ll be able to reach build up your credit score and get that much closer to your financial goals.