Steps to Take to Improve Your Credit Score
The timeless saying, cash is king, but credit is power, has proven to be true since the 19th century. No amount of cash in the world can compare to how imperative this 3-digit number is. Your credit score is the determinant of how likely you will be approved for a car, your first home, or even a small business loan. So it is always unfortunate to see the negative impacts that a low credit score can have on someone’s life. Instead of allowing a low credit score to control your financial moves, use these tips on how to raise your score and push yourself towards financial freedom.
Dispute any Errors on Your Credit History
It is wise to check your credit report every year to make sure that there is no fraud or incorrect information on your report. Unauthorized purchases and other credit discrepancies can affect your credit score. If there are any errors on your report, immediately contact your lender and whichever credit reporting agency your card is registered with. This will allow you to account for all your finances in one sitting and better spot any misinformation. If you have never reviewed your credit report it may be best to review your report every quarter.
Lower Your Credit Utilization Rate
Many people have never heard of, nor care about their credit utilization rate, yet fail to realize that this significant factor may be holding their credit score back. A credit utilization rate is the ratio of your current outstanding credit card balance(s) to the limits on your credit card. For example, if your credit card balance is $400 and your credit limit is $1,000, then your credit utilization rate is 40%. A lower rate is better because this shows credit lenders that you are only using a small percentage of the credit that you’ve been loaned and in a responsible way. It is ideal to keep your rate between 10 and 20%. An effective way to maintain a low credit utilization rate is to set up notifications to alert you when you are approaching your credit card limit on your card. Some ways to avoid reaching your credit card limit are to spread out your purchases throughout the month, increase your credit limit, or making more payments throughout the month. All of these suggestions can help lower your credit utilization rate and put you on the right track towards a great FICO score.
Reduce Your Debt and Pay Your Bills
One factor that influences your credit utilization rate is credit history. Lenders look at how often and consistent consumers pay off their monthly credit card bills. This reflects how willing they are to approve you for more credit cards or higher limits. Make sure that you are paying your bills on time regularly each month as this is a predictor of how likely you are to handle borrowed credit. To try and improve your credit score, it is in your favor to try and avoid foreclosures, late payments, repossessions, and bankruptcy.
Be Realistic and Have Patience
The most important tip to take away from all of this is that your score will not magically go up 100 points overnight. This is a process that should be taken seriously but also cut yourself some slack. Two of the most influential factors that affect good credit scores financial experts are the oldest accounts on your report and the average age of information. This simply means that it takes a long of time to reach a perfect credit score and an even shorter amount of time to lower your credit score due to negligence. Your relationship will be no different than your other personal relationships, there will be ups and downs and as time goes by you will discover and learn more about yourself and your spending habits. Try to establish good habits and early and remain disciplined so that if you do have a financial slip-up, the recovery period is not too harsh or too long. However, realize you are not by yourself and better financial days will come soon.
We strive for our customers to be as financially literate as possible because we understand how impactful a good credit score can be. We are here to assist you in any ways that we can so do not hesitate to stop into a local branch or go on our website to see how we can help you on your way to improving your credit.
