Your credit score is a critical part of your fiscal health. The interest rate that home buyers can get on their mortgage, for example, is directly influenced by their credit score. Here are four simple ways you can improve that score.
Pay Down Debt
A big part of your credit score is based on the ratio of the amount you owe compared to the credit you have available. Paying down debt, from a credit card, for example, can improve your credit score. Ideally, you want your credit utilization level below 30%.
Pay Those Bills on Time
Another big part of your credit score is on-time payments. Do you pay your bills on time, month after month after month? Not paying your bills or not paying them in a timely manner can definitely damage your credit score. If you have previous payments that are unpaid, we recommend resolving them as quickly as you can.
Reconcile Mistakes on Your Credit Report
You can get a free copy of your credit report once a year from each of the three major credit reporting companies – Equifax, Experian, and TransUnion. When you receive those reports, you want to scan them for mistakes or fraudulent activity. You’re the best person to search for and spot those mistakes. It’s possible the credit bureaus processed your credit information incorrectly or that lenders provided faulty information. Your credit reports could also have errors as a result of fraud. You should dispute any incorrect or incomplete information as soon as possible.
Be Careful Opening New Lines of Credit
Opening one new line of credit won’t hurt your credit score. In fact, it can help it, as it lowers your credit utilization level (see above). But opening several new lines of credit in a short period can have a negative impact on your credit score as it can be seen as an increased risk. This is not the same thing as rate shopping when you’re trying to buy a car or home, which is taken into account and should not affect your credit score.
Is today the day you take charge of your fiscal health and get on top of your credit score?