Tips to improve your Credit Score



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Tips to improve your Credit Score

A good credit score can open several opportunities to financially empower and achieve the financial goal for an individual e.g. open door to a new career, mortgage, new business, education, etc. This is a key time to learn more about how to maintain and establish good credit. The good news is that just by reading this, you’re by now taking the first steps on educating yourself toward improved credit and learning about what it takes to enhance your credit score.

Why is improving your credit score is so important?

When it comes to improving your credit, there actually is no time to waste. A low credit score may not seem like a huge deal until it’s time to pull your credit for a mortgage, car loan, insurance, and several other big life events. Americans with low credit scores may not be eligible to borrow money for these things or might end up with much higher interest rates than someone with a higher credit score. The earlier you begin working to improve your credit score, the easier it will be for you to accomplish these things.

Advanced technologies and useful tips to improve your Credit score:

  1. Credit Cards:

So, the easiest way to improve your credit score is through credit cards. A lot of people say that they’re evil and should be avoided at all costs, but they’re only bad if you use them incorrectly. Otherwise, they can actually be very beneficial to you because they help you improve your credit score and also give you rewards points.

 

The only things that you have to do — as far as debt is concerned — is to spend within your means (if you get $2,000 a month but have a $5,000 credit limit, spend $2,000 but not $5,000) and to pay your balance in full every month to avoid interest charges. Interest only starts accumulating on any remaining balance from your previous statement. So if you get a statement for $200, and you only pay $150, then the following month will include interest charges for the remaining $50. But if you pay in full every month, you’ll never get any interest charges.

  1. Pay Before Your Cycle Ends:

So, let’s quickly review. The steps so far are to get a credit card, spend money using it (within your means) because it gets you rewards, and then pay in full every month to avoid accumulating interest.

Sounds easy enough, right? Let me add one more tip to that: pay off most of your balance before the statement cycle ends. 30% of your credit score is determined by how much of your credit limit you’re using. If you’re using a high percentage of your total available credit limit, then your credit score will decrease dramatically. The ideal number is to keep your credit utilization at 10% or less. So if your credit limit is said $1,000, then ideally your reported balance should be $100 or less.

  1. Know how old your accounts are

Separate from payment history is the length of history of your credit accounts. At 15 percent of your score, this category is not nearly as important as payment history, but the age of your oldest accounts is still important. Be cautious about closing accounts that you don’t use much because a longer positive history counts for extra points.

 

One exception to this is if the card charges you a monthly or annual fee, especially if that fee is high. It will be worth it to seriously consider if you want to keep such expensive cards to improve your length of credit history when free cards will do just as well.

 

  1. Know how to beef up your score two ways

First, if you are looking to add some points to your credit score, one area that is often neglected is credit mix. This scoring factor is worth about 15 percent of your score and can make a real difference in your overall score.

 

Credit mix is the type of accounts you have. Lenders like to see a healthy mix of installment and revolving debt. Installment debt has a fixed payment and would be like your car payment, a furniture loan or your monthly mortgage payment. Credit cards are revolving debt that allows you to make only a minimum payment if you don’t want to or can’t pay the balance in full. Using credit cards wisely shows your spending discipline. Being able to keep up with fixed as well as variable payments signal stable financial health.

Second, check out the new Experian Boost program. Available in the first quarter of 2019, the Boost program will give you credit for paying your utility and mobile phone bills that you already pay. If you have a limited or thin credit history or have a low score, adding these positive payments to your credit file could give your score a significant “boost.”

  1. Know what not to do

Be very cautious about agreeing to co-sign for a loan or other credit account for anyone. Wanting to help a friend or family member is understandable, but if you co-sign you must be prepared to monitor whether payments are being made and be willing and able to take on the debt yourself should something happen to the other person.

 

Remember, you are co-signing because a professional who makes a living giving loans has said they don’t believe the borrower can make the payments. If you think you know better, think again. If you are comfortable with that, by all means, co-sign away. If not, see if there is another way you can help that does not involve your name (and credit) on their loan.

  1. Know your financial goals for 2019

Now is the time to dream dreams and write them down. Imagine embarking on a journey with no destination in mind. You could end up anywhere! Once you have goals, it’s much easier to develop a plan that will get you where you want to go. Whether it is to buy or lease a car, buy a home or just qualify for a great rewards credit card, your credit score will play a big role. Once you have a goal, the steps I have outlined below will help you get there as quickly as possible.

 



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