Five Ways to Improve Your Credit Score
Improving your credit score is a wise use of your time and resources. Good credit makes it easier to qualify for low-interest loans, credit cards, and other financial products. Even if you don’t plan to apply for credit right away, having a high credit score may save you money in the future.
Below we’re sharing five proven suggestions to help you improve your credit score as quickly as possible.
1. Be strategic when paying off your card balances and be mindful of credit utilization.
Your credit usage is the percentage of your credit limits that you are using at any one time. A reasonable rule of thumb is to use no more than 30% of your credit limit on any card, with lower being ideal. Less than 7% is used by the highest achievers. When the card issuer reports your balance to the credit bureaus, you want to make sure it’s low, because that’s what’s used to calculate your credit score. Paying down the balance before the billing cycle wraps up, or paying numerous times throughout the month, is an easy approach to keep your balance low.
2. Always pay your bills on time.
Your payment history has a significant impact on both your FICO and VantageScore, which are the two major types of credit scores that typically quantify how creditworthy an individual is. To a lender, a track record of on-time payments is a strong indicator that you’ll handle future loans responsibly as well. You’ll want to prevent payments made late, account defaulting, collateral repossessions, home or property foreclosures, and dreaded third-party collections. Anything that suggests that you haven’t acted to pay a liability may affect your credit score.
3. Leave your older accounts open, rather than closing them out immediately.
When you finally pay off your student loans or car loan, you may be eager to have any traces of it removed from your credit report. However, if you paid on time and in full, those debt records may actually enhance your credit score. It’s the same with your credit card accounts. An account that has been paid in full is a good thing; nevertheless, canceling an account in the hopes of improving one’s credit score is not something that customers should do automatically. Lenders and creditors search for accounts with a long history and a reliable track record of paying bills on time, every time.
4. Only apply for credit you plan to use.
A hard inquiry is made on your credit report every time you apply for a new line of credit. This type of question briefly decreases your score. It is not wise to apply only to see whether you are approved or because you have gotten a pre-approved offer for a card. The decline will be minor if it’s just a single hard credit pull. A series of hard inquiries, on the other hand, may indicate to lenders that you are taking on too much debt. A hard credit pull might have a 12-month impact on your credit score.
5. Regularly monitor your credit accounts.
When you check your own credit, a soft inquiry is made, which does not have the same impact as a hard inquiry. Monitoring the changes in your credit score every few months will help you figure out how well you’re managing your credit and whether you need to make any adjustments. However, your credit score should not be the main factor in every financial decision you make.
How to Check Your Credit Reports
If you’re a BankNewport customer, checking your credit score is easy, and free! You can access your credit score at any time through our digital banking tools and receive personalized tips to boost your score and save you money.
Another option is to use Experian, TransUnion, or Equifax, who all provide you with one free report per year.
Examine your credit report for any inaccuracies that could be lowering your score. If you discover errors on your credit report, you can have them deleted by disputing the information directly with the credit bureau. They have a legal obligation to investigate every matter and settle it in a timely manner. However, keep in mind that only inaccurate data can be removed from your report.
You can seek professional assistance if you’re unsure whether your report contains errors or if you’re having trouble resolving concerns on your own. Credit repair agencies can not only help you locate and remove incorrect information on your credit report, but they may also assist you lessen the impact of true negative items.