A good credit score can help you get a mortgage, car loan rate, or even land a new job. If you’re wondering how to get a better credit score, understand building a healthy, solid credit score takes time and consistency. You will need to develop healthy financial habits rather than looking for simple solutions. An excellent credit score is built over time by maintaining those good habits. Here’s how to improve your credit score:
Pay Your Bills on Time, Every Time
The single most effective habit for improving your credit rating is to pay your bills on time, like clockwork. Because payment history is such a large part of your credit score, even one missed payment can have a big impact. Consider setting emergency timers or using auto-pay so you can keep everything on schedule at all times. This habit also develops financial restraint.
Keep Credit Card Balances Low
Credit utilization, or how much of your available credit you’re using, has a big impact on your credit score. Try to keep it under 30% of your available credit limit on each card. Lower balances make you seem much more responsible in the eyes of lenders. For a bit more credibility, pay down balances early, if you can, before the statement closing date to keep utilization low.
Diversify Your Credit Types
A variety of credit accounts is another thing that can give your credit score a bump. It shows that you can responsibly handle “credit” in many flavours such as a credit card, car loan, or student loan — for your credit score. Lenders want to know that you can manage all different kinds of credit. However, don’t open new accounts simply to increase your mix. Only sign up for new credit when it fits in with your financial plan. You’ll build up a good mix naturally from there.
Avoid Frequent Credit Applications
Seeking a new loan or credit will likely trigger a hard inquiry on your credit file every time. Since credit-reporting bureaus consider multiple loan or credit applications within a short time to indicate you’re a higher default risk, your score is likely to drop. Don’t apply if you don’t really need it.
Regularly Check Your Credit Report
Carefully monitoring your credit allows you to detect and fix errors or fraudulent activity sooner rather than later, minimizing the chances of a score change. It also helps you identify areas to improve over time so you can reach and maintain a strong credit score.
Keep Older Accounts Open for Credit History
Your length of credit history is important to your overall score. If the card works for your wallet and you don’t feel tempted to overspend, don’t cancel it. Your oldest card can help you establish and maintain a history of creditworthiness. The longer your history, the more stable you appear to lenders. If you need to cut down on card use, removing a newer card from your wallet can make sense instead.
Building Long-Term Credit Strength
In the grand scheme, building and maintaining good credit is simple. When you’ve developed good habits, like paying on time and using a fraction of your credit limit and you understand how to have a better credit score, you’ll do the right things without even thinking about it. Cultivate those habits, and not only will your score rise, but it will remain there for many years to come.
markmunroe
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