8 Ways to Boost Your Credit Score
It’s no secret that the higher your credit score, the more likely you’ll be approved for loans or other financial undertakings. The three main credit bureaus that formulate credit scores include Experian, Equifax, and TransUnion. These bureaus track spending, follow account history, and monitor payments to construct credit scores – the number that essentially exemplifies financial behavior and history.
Although improving your credit score takes time, there are a variety of ways to jumpstart this process and improve your score over time.
Learn About Your Score
The first step is to figure out where your number is coming from.
There are free websites that you can visit to estimate your score using the credit bureaus’ standard formulas. Try credit.com or bankrate.com to estimate where you’ll likely land on the credit score scale.
You can also purchase a credit score tracker, which will include a breakdown of your score and offer an assessment as to why you received a particular number.
Smaller, Frequent Payments
Many people wait until the beginning or the end of the month to pay all of their monthly bills. Instead of lumping payments into one-time transfers, it’s better to make smaller payments throughout the month to enhance scores.
According to US News, “Such small payments help your credit score because they lower your debt utilization ratio, which accounts for 30 percent of your credit score.”
Keep Balances Low
Although this may seem like a no brainer, the key is to keep a big gap between your balance and your credit limit. The goal is to get balances below 30% of the credit limit on each card. This can actually have an impact on your score fairly quickly.
Large balances are usually a red flag to the credit bureau’s formula in comparison to your limit. If you keep this number as low as possible, you’re more likely to get the go-ahead from lenders.
Have Fewer Credit Cards
Apply for as few credit cards as necessary. Applications for credit cards show up on your credit report, which may affect your score in the long run. Having multiple credit applications indicates that you may be accruing more debt.
Use the credit cards that you already have, even if you have a lot of debt to pay off. Managing those accounts is more crucial then opening new ones.
Pay on Time
One of the most important factors when computing credit scores is paying the minimum balance on time. Credit analysts argue that late payments can significantly bring down your score. Even if the balance is five dollars, late payments can still factor in.
Pay Off Credit Card Debt First
Paying off your credit card debt before you pay off your car loan will earn you more points than you might think. Since your credit score weighs heavily on credit card balances and payments, consistently making payments on your credit card is a higher priority than eliminating a car payment.
Use Old Credit Cards
If you have credit cards that you no longer use, but have built credit with, the accounts are likely to be deemed inactive by credit bureaus. Thus, you’ll be missing out on potential points. If you have cards, use them.
Track Your Score
After you start making some financial changes, be sure to keep track of your score on a monthly basis. Note the strategies that work and reassess progress consistently. Before you know it your score will gradually improve.