Credit Tips

Ten Simple Ways to Improve Your Credit Score

Your credit score represents one of the most important things to consider when you’re thinking of picking up a new vehicle, especially when it isn’t quite as strong as it could be. More and more people are finding themselves in the same boat, with poor credit scores stopping them from receiving the best loans and interest rates. Fortunately, there are a number of ways to help give yours a boost.

1. Get to know your credit report.

Your credit score is just a number derived from your overall credit report. These are easy to read and easily available, letting you understand your accounts and debt. Make sure to review it annually or whenever you’re committing to a major purchase. The more you know, the easier to will be to improve.

2. Understand your credit score.

Your credit score essentially represents how risky you are to lend to. Request a score when you ask for your report, and you’ll be informed of exactly what it means and which part of the report is negatively affecting it.

3. Be consistent with identification for credit applications.

Make sure that all your accounts are matched to the correct report and decrease the likelihood of an incomplete report by using the same ID for each application.

4. Create a budget. Don’t break it. 

Credit can balance out larger payments, but it isn’t there to let you live beyond your means — doing that will catch up with you. If you can’t afford it, don’t buy it on credit.

5. Find the right level of credit. 

A credit history is meant to show that you’re reliable, so make sure you have a few active accounts. At the same time, too many credit cards will be a temptation to spend more, and won’t help your rating.

6. Pay on time.

Nothing is worse than seeing your credit score drop because you paid money back but didn’t do so fast enough. If you were late once, it implies that you’ll be unable to pay future debts. If things get serious, contact your lender to see if you can set up a different interest rate or payment schedule.

7. Combine credit types.

Installment loans, student loans, and car loans are a great way to build credit, but try combining them with a revolving account, like a credit card. You have more control over these, so they help demonstrate responsibility.

8. Minimize credit card balances.

Keeping your credit card balance near its limit and only paying off the minimum amount each month will make you appear to be an increased credit risk. Keep your balances low to demonstrate that you aren’t the sort of person who takes on too much debt.

9. Think before closing accounts.

Closing an account can result in an increase to your utilization rate, which will negatively affect your score. Try to eliminate a few cards with a high interest rate or fee only if you have enough credit available.

10. Open new credit accounts only when necessary.

Don’t be tempted to open a new credit account just because it’s available. This may indicate that you’ve shouldered new debt that isn’t yet on your credit report, or that you’re trying to live off of borrowed money.