Three Ways to Improve Your Credit Score
September 24, 2020
Having a strong credit score can mean saving money, earning perks, and more. It is considered by lenders before you are approved for a loan. Employers and landlords may also check your score before deciding to hire you or rent you an apartment. If you want to improve your credit score, here are three steps to take.
What is a credit score?
A credit score is a three-digit number based on information in a credit report, including loan payment history and balances on credit cards. Credit scores range from 300 to 850, and consumers with higher scores generally receive better interest rates.
How can I improve my credit score?
Here are three steps you can take to start increasing your score:
1. Pay on time
Making payments on time is the best way to improve your credit score. Payment history impacts your score the most, so paying all bills promptly counts. This includes payments for cell phone service, credit cards, rent, and utilities.
2. Watch credit usage
Keeping your credit usage to under 30% is another step to take to increase your score. Credit usage is calculated by determining how much you currently owe on each credit card divided by the credit limit for each card. The under 30% rule applies to your overall credit usage as well as individual cards. To improve your usage:
- Pay more than the monthly minimum
- Leave cards open after paying them off
- Refinance high interest-rate credit cards to a loan with a lower rate, if possible
3. Monitor credit score and credit report
Finally, regularly check your credit score and credit report. Your financial institution may provide your credit score for free, or visit Upgrade Credit Health to get a free credit score. Your credit report, which shows your bill payment history, current debt, and other financial information, is used to determine your credit score.
You can obtain your credit report for free through annualcreditreport.com. View your credit score every four months to check your progress. You can request one credit report per year from each of the three credit bureaus (Experian, Equifax and Transunion) for free through the annual credit report website to ensure there are no errors.
It takes time to improve your credit score, but each of these steps can help, so stick to it. As your credit improves, you may start to qualify for lower interest rates, save money, and be in a better position to achieve financial success.
Tags: Credit Cards, Money Management, Learn About Credit