Five Credit Score Boosters to Try Today
You know that boosting your credit score can dramatically reduce your rates on everything from mortgage interest to car insurance. Given that information, it makes sense to seek out the fastest ways to improve your FICO and start socking away those savings. Try these five easy strategies to improve your credit and begin building financial stability.
Set Automatic Payments
Most people forget to pay a bill every once in a while. Arranging automatic payments ensures that you aren't bogged down by late fees and penalties. It can also have a positive influence on your credit score since late payments stay on your record for more than seven years.
If you struggle to pay all your bills each month, create a clear budget and look for expenses you can trim to make ends meet. Payment history represents about 35% of your overall credit score, making it the largest FICO factor.
Pay Revolving Balances Promptly
Carrying a balance on your credit cards from month to month can eventually cost you thousands of dollars in interest. This practice also reduces your available credit, a factor that can damage your credit score. Pay off as much as possible of your credit card balance each month to see a FICO increase.
Most experts recommend keeping at least 70% of your available credit open. Your so-called credit ratio makes up about 30% of your credit score.
Apply for New Credit
While this advice may seem counterintuitive, increasing your available credit can improve your score. Let's harken back to the advice above about using no more than 30% of your credit. It's a lot easier to keep your balance low within these parameters when you have a $10,000 limit than with a $1,000 limit.
Obtaining different types of credit accounts also diversifies your profile, a positive in the eyes of the credit bureaus. In fact, this characteristic comprises about 10% of your FICO score. Weigh your chances of approval with each new account since too many applications will lower your credit score.
If you cannot qualify for new credit but have a parent or spouse who has a good credit score, ask for them to add you to one of their accounts as an authorized user. They do not actually have to let you use or access your account to create a positive impact on your credit. You can also apply for a secured credit card, which requires a deposit to build a good credit history.
Correct Credit Report Errors
Data issues and reporting errors can significantly affect your credit score for the worse. You can obtain a free copy of your credit reports every year from each of the three credit bureaus (Experian, TransUnion and Equifax). Make a date to review each one annually and immediately dispute incorrect information. Common issues that can impact your credit score include incorrect balance or credit limit reporting, repeated debt listings, closed accounts listed as open, and incorrect reports of delinquency.
Request Removal of Old Issues
Problems with your credit will remain on your history years after you have resolved these accounts. When you have an old delinquency, it will not immediately fall off your credit report on a specified expiration date. Instead, reach out to the creditor or collection agency with proof of payment and ask them to request the removal of the black mark from your credit report. While this strategy takes some legwork, it can effectively bring your score into the present if you've been working to improve your finances after past concerns.
With these five tips, you'll begin to move the needle to see real results for your credit score. Frequent monitoring will help keep you on the right track.