How to Boost Your Credit Score

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How often do you think about your credit score? Probably not very often – until it’s time to apply for a new credit card, a car loan, or something else where a lender will be looking into your credit background. And then you may have a moment of panic as you wonder what they’ll see.

Establishing good credit is important for many reasons. It can improve your chances of being approved for a loan. Good credit can bring you better interest rates on loans. It can help you avoid security deposits. It can even help with your car insurance rates. 

Credit scores are usually listed as follows:

  • Bad credit is usually considered to be between 300-629. A score within this range can make it difficult to qualify for credit.
  • Fair credit is usually considered to be between 630-689. You will have more options for obtaining credit here, but you will probably pay a higher interest rate.
  • Good credit is usually considered to be between 690-719. You will find that you have even more options for obtaining credit and a better interest rate.
  • Excellent credit is usually considered to be a score of 720 and up. You will have excellent options for obtaining credit and lower interest rates.  

You may be asking, “What should you do if you want to improve your credit score?” Thankfully,  the things you need to do to improve your score are not too hard, but it can take a while for your score to reflect your efforts. That being said, there’s no time like the present to get started. 

  • Pay Your Bills on Time: Did you know that your bill payment history has the biggest effect on your credit score? That’s why it’s essential that you pay each and every bill on time. Late payments can stay on your credit report for seven years, and they are one of the first things that a new potential lender looks at. Of course, if you do happen to be late with a payment, get caught up as soon as possible and consider calling your creditor to see if they would not report the payment as missed.
  • Pay Off Your Debt and Keep the Balances on Your Credit Cards Low: Another thing that factors into your credit score is your credit utilization ratio. Your credit utilization ratio is calculated by adding all of your credit card balances at any given time and dividing that amount by your total credit limit. Lenders usually look for rates of 30% or less. To improve your score, pay off your debts and keep your credit card balances low. 
  • Only Apply For and Open New Credit If You Need It: Opening new credit just for the sake of having a better mixture of credit is probably not going to help your score. Only apply for credit when you need it. This will reduce your temptation to overspend and create debt, and avoid you having a bunch of inquiries into your credit, which can be detrimental.
  • Don’t Close Out Those Unused Credit Cards: If you have unused credit cards that you are not using, you may be tempted to close those accounts. But, remember that closing those accounts can have a negative impact on your credit utilization ratio. Closing the accounts could increase your ratio, which impacts you negatively in the world of credit. Keep them open as long as you don’t incur an annual fee.
  • Don’t Apply for Too Much New Credit All at Once: When you apply for new credit, it creates what is known as a “hard inquiry.” Too many of these inquiries can also have a negative impact on your score. Although these inquiries usually go away after two years.
  • Check Your Credit Report for Mistakes: Remember, you can get your credit report once per year for free by going to: Annual Credit Report.com. When you get your report, be sure to check for any errors and work to get them fixed. Even things such as an incorrect street address or misspelling of your name should be fixed.

A good credit score is definitely important and can have a significant impact on your life when it comes to obtaining additional credit. Check your score now and work to get it up to a number that will benefit you in the future. 

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