Let’s get really honest for a minute: Do you know your credit score?
While this three-digit number may not define you, it does define your credit. Lenders look to your credit score in determining whether to lend you money and under what terms. Whether you need a loan for a new car, a mortgage to purchase your first home, or just want to open a new credit card, having a higher credit score improves your chances at approval and means better credit terms.
So, what if your credit score is low? While there are no quick fixes to instantly achieve a high credit score, there are several steps you can take to quickly give your credit score a little boost. Read on to learn how you can get your credit score moving in the right direction.
1. Pay Your Bills on Time
When it comes to lending and borrowing, past performance is a good indication of future performance. If you have delinquent accounts or make a habit of paying your bills late, this can tank your credit score. Plus, delinquencies generally stay on your credit report for seven years. Lenders want to give money to reliable people, so if you want to establish a solid credit reputation, pay those bills on time. If this is an issue for you, try pulling out a tool like automatic bill pay to keep you on track.
2. Pay Off Debt and keep Balances Down
It is a good practice to pay off debt as quickly as possible. Not only does this ultimately save you money by limiting the amount of interest you pay over time, but your debt also determines your credit utilization ratio. A key factor in your credit score, your ratio is calculated by dividing your total credit card debt by your total credit limit. Generally, lenders look for a ratio below thirty percent. However, if you want to improve your credit score quickly, keep your ratio around ten percent, as the lower the ratio, the more that creditors will assume that you manage your credit responsibly.
3. Make Strategic Credit Decisions
If you are trying to boost your credit score, it’s vital to only apply for the credit you need. Unnecessary credit can not only tempt you into accruing more debt, but it also creates hard inquiries on your report which lowers your credit score (Generally speaking, hard Inquiries remain on your credit report for two years, so proceed with caution in applying for new credit).
Additionally, it is advisable, generally, to avoid closing credit accounts, even if you pay off the balance and have no need to use the card again. Closing credit accounts can also lower your score by increasing your credit utilization ratio. Worried you’ll abuse your cards? Simply store them somewhere you will not be tempted to use them, but keep the accounts open.
4. Correct any Inaccuracies in Your Credit Report
This step sounds almost too easy, but don’t disregard it! Check your credit annually by pulling a free report from all three credit bureaus: TransUnion, Equifax, and Experian. Parse the reports for any inaccuracies and report them. Even the smallest detail can impact your score.