Boosting a Credit Score Takes Time, but can be done through some very simple steps and financial habits you can build with a bit of knowledge and discipline.
Below are some important financial habits and steps you can take to get started.
- Pay Bills Timely (This is the most important thing)
- Utilize the Appropriate Amount of Credit (it is better to use 30% or less of your credit card limits)
- Don’t Carry Balances (Pay your cards in full each month)
- Monitor Your Credit Report and look for tips on your unique situation from free services
Paying Bills Timely
Timely payment of bills is one of the largest factors impacting your credit score and credit. Lenders want to see a history of reliability in making payments and good financial habits. This is shown through using credit responsibly and making timely payments on loans and bills (auto insurance, loans, credit cards, rent, cable, telephone, etc.). Make certain you are responsible and timely pay all bills, avoid having late payments reported on your credit and you will position yourself well to continue building your credit and score.
Utilize the Appropriate Amount of Credit
major factor in your credit score is how much revolving credit you have versus how much you’re actually using. The smaller that percentage is, the better it is for your credit rating.
The optimum: 30 percent or lower.
To boost your score, pay down your balances, and keep those balances low.
If you have multiple credit card balances, consolidating them with a personal loan could help your score.
What you might not know: Even if you pay balances in full every month, you still could have a higher utilization ratio than you’d expect. That’s because some issuers use the balance on your statement as the one reported to the bureau. Even if you’re paying balances in full every month, your credit score will still weigh your monthly balances.
One strategy: See if the credit card issuer will accept multiple payments throughout the month.
Don’t Carry Credit Card Balances
Paying off credit card balances or paying them in full each month is a great way to boost your credit score. You do need to utilize credit to build your score to show you can use credit responsibly, but pay it in full.
The reason this strategy can boost your score: Having multiple cards with balances can hurt your score and your financial ratios like debt to income, and thus a lenders consideration as to your ability to pay a certain debt load out of your income (with a higher debt to income, higher balances, you are a more risky loan).
It is therefore recommended to carry a balance on one card or not at all and to consolidate loans and pay them down if possible.
Monitor Your Credit Report
One of the ways to improve your credit score is to monitor your credit report and score and by leaving old loans or your past credit history showing a positive repayment history on your report. They are positives and show your history of repayments. By focusing on and paying attention to your credit report and score you may learn new ways to improve your credit from free services such as Credit Karma.com.
Use the above to improve your credit score.