4 Ways to Improve Your Credit Score
You might not think about your credit score very often, but when you’re making a large purchase, such as a house or vehicle, it can make a big difference in whether you’re approved for the loan and how much interest you pay. From personal loans to credit cards or even an apartment lease, a good credit score will get you the best interest rates and financing options for important purchases.
Find Out Your Credit Score
If you don’t know your current credit score, there are ways to find out. Most credit card companies provide the benefit of credit score reporting at no additional charge. If your credit card company does not offer credit reporting, you can request a free copy of your credit report from AnnualCreditReport.com once a year. It will include reporting from each of the three major credit reporting agencies: Equifax®, Experian®, and TransUnion®. The report will give a detailed breakdown of your credit and what is impacting your score, as well as any recent inquiries.
Don’t Miss Payments
One of the biggest issues that individuals face when trying to maintain their credit is late payments. It’s very important to stay on top of your credit card and loan payments. Set calendar reminders so you know when a due date is approaching. In some cases, you can change your monthly due date, but usually only once within a certain period. If you know you won’t make a payment on time, take advantage of this option to avoid having a late payment on record. When budgeting your finances, making payments toward any debt or credit cards should be a top priority since those affect your credit score.
Catch Up on Past-Due Accounts
In the event that you fall behind on payments, make it a priority to catch up. A past-due account will have a bigger impact on your score than a one-time late payment. Some credit card companies allow you to adjust your minimum payment amount. If this option is available to you, you might want to lower your minimum payment to be more manageable. Another option is consolidating your debt so that you only have one monthly payment to worry about.
Keep Your Credit Utilization Ratio Low
Owning a credit card makes it very easy and tempting to spend well outside your means. Since high credit utilization can negatively affect your credit score, it’s recommended that your utilization stay below 30%. Keeping a low utilization has a few benefits. Most importantly, your debt will be more manageable and easier to payoff. You also will have a buffer of credit that could be used for emergency expenses, and you’ll pay less interest over time. You can ask your credit card company to lower your credit line limit to keep yourself from incurring more debt than you can manage.
Limit Your Number of Credit Applications
The number of inquiries into your credit information will affect your credit score. There are two types of inquiries: hard inquiries and soft inquires. A soft inquiry occurs when a credit card company “pre-approves” you for a credit card. Companies look at your credit in order to make you an offer, but it does not affect your credit score. A hard inquiry will occur whenever you apply for a loan. Having multiple hard inquiries in a short period can negatively affect your score. If you are planning to apply for a loan or credit card, do your research. Applying to several places will result in several hard inquires, driving your credit score down. You’re better off choosing one loan to apply for.
While credit scores can be tricky to understand, an okay credit score is better than having no score at all. Your credit score serves as a profile for your financial history, so be mindful of the purchases you make and how they could affect your score. Stay on top of your payments and if you are able, pay more than the minimum amount. To speak with a financial expert to better understand your credit score and how to improve it, visit PlainsCapital.com for more information.