5 Ways to Improve a Credit Score
Credit scores can tell lenders, landlords, and employers a few things about a person: how often one applies for loans or credit cards, the amount of open credit accounts, any missed payments, if there are maxed-out credit lines, and debt to income ratio. Because credit scores are important for making larger purchases, like a house or vehicle, it’s important to make sure your credit score is accurate and in “good standing”.
Not comfortable in the current score of your credit? Here are a few ways to improve it.
Make Sure Your Credit Report is Accurate
The first place to gather all the information that is basing your credit score can be found on your credit report. It’s recommended to pull your credit report annually, and federal law allows you to get a free copy of your credit report every 12 months from the 3 major credit bureaus: Experian, Equifax, and TransUnion.
Verify that all of your information is correct and up to date on your credit report. If something looks wrong, dispute the incorrect details with the proper credit bureau and lender.
Some questions to ask when reviewing your credit report for potential errors:
· Is your personal information up to date?
· Are all of your credit accounts reported?
· Are there any late or missed payments listed that may be incorrect?
· Are there accounts or applications for credit you don’t recognize?
· Are there old credits or loans still appearing on your report that shouldn’t be?
Get Late Payments Back on Track
This may seem like an obvious way to keep your credit score high, but payment history counts toward 35% of your overall credit score and late payments can stay on your credit report for up to seven years.
If you’re struggling to get your payments paid on time due to a change in employment or financial emergency, or you have one late payment on your credit history already, don’t be afraid to reach out to your lenders. There are many reasons you may have missed a payment or paid late, but most companies can be flexible and forgive a late payment.
Need to reevaluate your spending habits? Use our free Budgeting Tool to see your fixed costs versus flexible costs.
Learn more with our free, online Credit Score and Reports module.
Work on Building Credit History
One of the better kept secrets of a credit score, is all about the length of your credit history. The longer you have a line of credit open and active, the stronger your credit score.
An average age of credit history is typically five years and up. So how do you build good credit history if you’re just starting out? One of the recommended ways is to open a credit card and make budget-friendly purchases. As you make regular, timely payments, you’ll begin to establish a credit history and show lenders you’re a responsible borrower.
If you need to rebuild your credit history, consider applying for a secured credit card to get started. Secured credit cards typically require a deposit, which serves as collateral to ensure good standing with your credit card payments. This deposit may be released by your credit card lender after a number of months or when the account is closed.
Understand Your Credit Utilization Ratio
Credit utilization ratio impacts your credit score and is the percentage of the credit currently owed against the remaining credit available. If your credit card balances are more than 30% of your credit limits for a long period of time, your credit score may start to suffer because your statement balance is what’s being reported to credit bureaus.
In theory, this means owing $1,000 on one credit card with a $1,500 limit is can be more hurtful to your credit score (even if you’re paying on time) than owing the same amount between three credit cards with a combined $5,000 limit.
If you already have a few credit cards and want to consider paying them down faster, look into a balance transfer to lower your annual percentage rate (APR). Want to start comparing rates? Learn more about the credit cards offered at the credit union.
Get a Credit Card
If you’ve never had a credit card before or you’ve just closed all of your previous consumer lines of credit, it may be time to reestablish your credit history. A new credit card can offer a lot of relief to start building your credit score.
For new credit card users, ask yourself how you plan to utilize the card and start looking for one that fits your needs and gives rewards. The credit union offers cash back, low rates, and a points for credit card options to fit any consumer. If you’re rebuilding your credit score and need to show lenders you’re back on solid ground, a secured credit card can be the right choice.
Remember, building your credit score isn’t a quick fix and can take three to six months before your new credit card is established in your credit report.
Questions about applying for a credit card? Call our Member Contact Center at 1-877-325-2848 or send us an email on our contact form.
How do you see your credit score? Do you have credit score building tips or a personal story to share about getting your credit score back on track? Let us know! Drop a comment in the story below!