• Article by: frg_admin
• Posted: June 8, 2019

With all of the free credit checkers on the market, it’s never been easier to take a glance at your credit score. Sites such as CreditSesame.com, CreditKarma.com and Experian.com offer you access to your scores and report for free most of the time. But, what happens when your report comes back and your credit score isn’t as high as you would like? Your credit score is a significant part of your financial life. It’s what lenders use to determine if you’re eligible for loans, and it can be the deciding factor when you apply for your mortgage.

Also, believe it or not, many jobs will look at a modified version of your credit report during the onboarding process. Candidates with checkered pasts and negative credit patterns may be seen as untrustworthy around financials or other business areas by potential employers. So, a low credit score can be a significant life barrier.

Luckily, your credit score is in a constant state of flux. And, you can always boost your score by practicing some good credit behaviors. Let’s dive into a few methods that will help you improve your credit score so you can jump over life’s credit hurdles.

1. Pay Your Bills on Time

This may sound obvious, but paying your bills on time is a massive component of your credit score. Lenders want to see how reliable you are with payments, and negative past performance with bills acts as a massive red flag for potential lenders. It’s not all about paying your credit card bills back in time. Your credit score will take into account all of your bills — including your mortgage, rent payments, utilities, car payments, etc.

If your score is low, you probably already have some missed payments. That’s fine! Make sure you start paying all of your bills on time starting today. Old missed payments will still stick around for 7 years. But, newer payments have more of an impact on your credit score than older payments.

According to FICO, a single missed payment can drop your score by as many as 110 points. Luckily, that impact diminishes over time, and your on-time payments can add up fast.

2. Take Care of Your Debt

Credit is a slippery slope. Once you skip a few of your bills, the interest and payments can snowball, causing you to miss more payments. So, when you go and look at how much you have left, you may feel defeated, disengaged, and completely fed up with attempting to correct your credit. You’re not alone. 43% of Americans carry credit card debt, and 15% of families spend more than they receive each month. But, taking care of those credit card payments or loan debts can reduce your stress levels and improve your credit score — making it easier to access some of life’s most critical assets (e.g., homes, cars, etc.)

There are two primary methods of tackling credit card debt.

• The Snowball Method: This method involves making the minimum payments on all of your debts. Then, you pay off your smallest debts first regardless of the interest rate. The idea here is that the good feelings you get from paying off entire debts will propel you into paying off further debts.
• The Avalanche Method: This method involves making the minimum payments on all of your debts. Then, you will pay off your highest interest loans first regardless of the size. The avalanche method will ensure that you pay the least amount possible over the course of your loans.

3. Get a Secured Card

Depending upon how low your credit score is, applying for a credit card may be out-of-the-question. Luckily, anyone qualifies for a secured credit card. Instead of taking out a line-of-credit from a lender, you give the card company a refundable security deposit that acts as your credit limit. Over time, your limit may be increased above the security deposit depending upon your payment history.

Since secured cards are still technically credit cards, your history will get reported to credit agencies. This can be an easy way to build up your score on extremely low credit.

4. Fix Your Credit Utilization Ration

Your credit utilization ratio is your credit card balance compared to your credit card limit. So, let’s say that you have a $5,000 credit limit. And, you have $500 on your credit card balance. You have utilized 10% of your credit card — which is great! You want to keep that number under 30%. Individuals with high credit scores typically have low credit utilization. It shows lenders that you’re responsible with your cards and you keep a low balance for repayment.

There are two ways to decrease your credit utilization.

1. Lower your balance by paying it off or reducing your spending.
2. Increase your maximum credit line.

5. Avoid New Credit Cards

If you’re trying to improve your score, think twice about applying for a new credit card. Hard inquiries — such as those performed by credit card companies when you apply for a new card — can reduce your credit score. This may seem strange. But, lenders take you applying for many lines of credit as a negative. And, they may think you are a potential risk, and you’re looking for large pools of lender money that you don’t play to pay back.

Checking your own score is a soft inquiry, and it doesn’t impact your credit score unless you are doing it constantly. 

6. Report Inaccuracies Immediately

Mistakes happen. And that is true for your credit report also. It is not uncommon for your report to contain inaccurate or unverified information. Sometimes your report may contain information on an account that isn’t yours. Or, one of your creditors may have mistakenly reported something negative about you, like a missed or late payment that didn’t actually happen. If you think this may be the case, report it to the credit bureau immediately.

The key takeaway here is to be proactive. Know your credit score, verify your reports are accurate, and follow these steps above to ensure you are maintaining and improving a healthy score. Your credit score is a leading factor for your financial health. Take charge of it today.