Credit scores are important because they can open up certain financial opportunities depending on how high your score is. A credit score typically ranges, from lowest to highest, between bad, fair, good, and excellent. Higher credit scores can often save you money with more favorable terms on different credit products, such as credit cards or loans.
But you’ll need to stick to certain guidelines to achieve a good credit score. Here are some steps you can take today to start helping to improve your credit immediately.
Pay your bills on time
Paying your bills, including credit card payments, on time has two primary benefits. First, it will help you stay out of credit card debt. Second, it will eliminate the chance of having a late or missed payment. Even one missed payment can negatively affect your credit score.
To stay on top of your bills, consider using a feature like autopay so you don’t miss any due dates.
Review your credit report and dispute errors
Your credit report is like a report card with all the information about your financial situation. Your credit score is the grade you receive from this information. Sometimes the information on your credit report is wrong, which can impact your credit score.
Review your credit information with free credit reports from all three credit bureaus at AnnualCreditReport.com. If you find any errors, file a dispute with the applicable credit bureau.
Ask for a credit increase
If you frequently use a lot of your available credit, such as maxing out a credit card, you could see a drop in your credit score. This is because your credit utilization is likely too high. Credit utilization is the percentage of how much credit you’re using divided by how much total credit you have available.
It’s typically best to use less than 30% of your total credit to have a good credit utilization ratio.
Add to your credit mix
Using multiple types of credit products can help improve your credit score. For example, utilizing both credit cards and loans would be better than only utilizing credit cards. Of course, it’s still possible to improve your credit score without much credit diversification, but you should see more improvement as you mix in different types of credit.
Pay any past-due bills
Late payments can take at least 30 days to show up on your credit report, which leaves room for you to still make the payment if you’ve barely missed it. In some cases, lenders may not report a late payment to the credit bureaus if you make a full payment that falls within the first 30 days. Additionally, paying off your debt is important because you don’t want to incur late fees.
Pay bills twice a month
The actual action of making payments to a credit card twice a month won’t do anything for your credit score. But it could help your score in indirect ways. For example, you’re less likely to miss a payment if you make multiple payments a month. And with two payments a month, your balances should be lower, which can help your credit utilization.
Use a secured credit card
If you’re just starting your credit journey or working to rebuild your credit, a secured credit card could help. These cards don’t have strict qualifications, though a security deposit is often required. Your credit limit is often the same as how much money you’ve deposited.
Many secured credit cards will report your credit activity to one or a few of the major credit bureaus, which is ideal for improving your credit score.
Pay down balances
Keeping high balances on your credit cards can affect your credit utilization ratio, which may have a negative impact on your credit score. Remember to monitor your balances through your card’s online account or mobile app and pay them down if they’re getting too high, even if a payment isn’t due yet.
Keep old accounts open
Your credit history length is another important factor in determining your credit score. If you have a longer credit history, you’ll typically have a higher credit score.
To improve your credit history length, don’t close your old credit accounts if you don’t have to. If old credit cards don’t have annual fees, it doesn’t hurt to keep them open and use them every once in a while for small purchases so the card issuer doesn’t close the account.
As learn credit score basics and work to take these steps toward improving your credit score, remember to have patience with yourself and celebrate your positive forward movement. Also, be sure to avoid certain money mistakes along the way. This could include missing out on valuable credit card rewards or not using everyday expenses, such as your Netflix bill, to help boost your credit score.
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