Financial Habits to Help Build your Credit Score
We live in a world that demands good credit. If you want to finance anything - be it a car or a home mortgage - you have to have good credit. Whether you’re trying to raise your credit score due to prior derogatory marks on your account, or you’re starting from scratch with little-to-no credit history; these tips and tricks are proven strategies to help raise your credit score wherever you’re at in life.
- Know What Your Credit Score Is (Weekly and Annual Reports): There are free credit monitoring apps and services that you can use to check your credit score weekly and annually. Both Credit Karma and TurboTax are great resources to give you good perspective as to what your credit score looks like on a week-to-week basis. Weekly monitoring is a great way to catch little mistakes and stay up-to-date on all of the changes happening on a weekly basis. You should also take advantage of the opportunity to request your full credit report one time per year without having an affect on your score.
- Dispute Inaccuracies: As soon as you come across a red flag that there was a hit on your credit, dispute it. A missed payment that wasn’t truly missed or an account opened under your name by somebody else can take a serious toll on your credit score. That is why it is so incredibly important that you dispute any mistakes that you find as soon as they arise. At the end of the day, you are solely responsible for your own credit health.
- Pay Your Bills On Time (Or Before They’re Due): While there are multiple factors that affect your credit score, payment history is the most important of them all. Making up 35% of your FICO credit score, missing a single payment can be detrimental to your credit health. These marks can leave lasting impressions on your credit report for up to seven years. The best way to prevent this from happening altogether is by setting up automatic payments that are scheduled to go through before your bill is due. This will ensure that payments are made on time, and will boost your score even more by paying before the initial due date. Making multiple payments throughout the month is another great way to score extra points on your report, as well.
- Take Out A Secured Loan or Credit Builder Loan: Creditors want to see that you’re utilizing your credit and making monthly payments. By taking out a secured loan, you are putting up collateral to back the loan to ensure creditors that you’ll be making payments on time. You can either use the loan to pay for something you currently need, or save it to repay the loan monthly to guarantee that you’ll have the funds to do so. A Credit Builder Loan is another great option because you will essentially get all of your money back once the loan is paid off. The money you put toward the loan goes into a savings account so that when it is paid off, a large percentage of it is returned back to you while simultaneously raising your credit score in the process - it’s a win-win.
- Apply For A Secured Credit Card: Secured Credit Cards are different from regular credit cards because you place a refundable security deposit on the card that acts as your credit limit. This guarantees that you will never spend more than you already have, but allows you to raise your credit score in a safe and practical way. Some secured cards even offer rewards programs as an incentive to sign up and utili
- ze them.
- Keep Unused Accounts Open - Just Freeze Them: If you have older accounts that you don’t use anymore, push the pause button on calling to close those accounts. Instead, cut up the card and ensure you’ve paid off your entire bill before essentially forgetting about it. Letting your credit accounts age is a great way to raise your credit score over time while keeping multiple lines/forms of credit open looks great on your FICO report. On the other hand, don’t try to open six accounts in a single calendar year. The more hard inquiries you have on your account, the lower your score will drop. Spread out larger purchases to give your credit score a break.
- Keep Total Debt Below 10% of Total Available Credit: Your total available cr
edit is the credit limit on all of your accounts. For example, if you have five cards with $2,000 limits on each card, then your total available credit is $10,000. Therefore, you should keep less than $1,000 total on your cards to maximize your credit utilization score.
For more information on ways to improve your credit score reach out to us at 208-734-1500 or contact us online.