Quick and Easy Ways to Improve Your Credit Score
February 11, 2021
Having a good credit score has many benefits, including helping you receive competitive interest rates for cars loans, credit card offers, insurance premiums, mortgages, and more. Maintaining a high credit score is worth the effort because it can save you money. Here are a few tips to improve your score.
First, you need to know what your credit score is. Credit scores range from 300 to 850; the higher the score, the better loan terms you can qualify for. You can obtain your credit score from your financial institution and other financial services, including Mint and Credit Karma.
Here is how your credit score is determined:
- Payment history (30%) – paying bills on time
- Credit usage (30%) - ratio between credit available and how much you are using
- Credit age (15%) - how long your credit lines have been open
- Account mix (10%) - variety of credit lines, such as a mortgage, credit card, etc.
- Credit inquiries (10%) – inquiries include applying for many credit cards
Next, review your credit report, which is your unique financial history. You can obtain your credit report for free annually from each of the three credit bureaus — Equifax, Experian, and TransUnion — through annualcreditreport.com. It is recommended you check your credit report quarterly to make sure everything is accurate.
To improve your score, start with the two areas which will impact it the most: payment history and credit usage.
Even paying one bill late can lower your credit score. If you need assistance with paying your bills on time, set up a budget, reminders on your phone and online calendar, or set up automatic payments through your financial institution’s mobile app.
To improve your credit usage numbers — how much of your total credit card limit you use — set a goal of using less than 30% of the limit of each credit card. For example, if you have a $10,000 limit on one line of credit, do not hold a credit card balance of more than $3,000.
By taking steps to pay all bills on time, and keeping your credit usage under 30%, you will see these efforts reflected on your credit score, and receive more favorable loan rates.
Tags: Learn About Credit, Money Management, Tips and Tricks