A good credit score can potentially save you thousands of dollars over the course of a loan. Improving your credit score can get you approved for better rates on mortgage, auto loans, and just about anything that needs financing! Here are some ways you can work on improving your score to begin your savings:
Check your credit report and dispute any errors
Checking your credit report is important to see where you stand financially. Viewing your credit score on your report shows lenders and creditors how well you borrow.
It’s important to review and identify any disputes, if applicable. A mistake on your credit report could be what’s keeping your score low. Mistakes on your report can consist of payments marked late when you have paid on time, inaccurate information, another person’s credit activity mixed with yours, or other discrepancies. You can access your free report at AnnualCreditReport.com from each of the three major credit bureaus. For ways to help dispute your report, check out this article.
Make payments on time
Your payment history is a key factor in determining your credit score. Paying on time and early helps to keep your score higher, as any negative occurrences on your payment history will affect the score. Many of the credit bureaus, including FICO and VantageScore, view payment history as the most influential factor in determining a person’s credit score. Your payments should be made on time (or early) to ensure no late fees incur. Consider setting payment alerts in a virtual planner or calendar to remind you. Consistently making on-time payments can raise your score in a matter of months.
Keep credit utilization low
One of the best ways to help your credit score is to properly use your credit utilization ratio, which is the amount of revolving credit you’re currently using divided by the total amount of credit you have available. It’s best to use 30% or less of your credit utilization to keep your credit score high. For example, a $10,000 credit limit means using no more than $3,000 of your total revolving credit. A low credit utilization rate shows you are using less than your available credit, which reflects a good job of managing your credit and not overspending.
Diversify your credit mix
Your credit mix consists of different credit accounts that you have which can include auto, mortgage, student loans, and credit cards. Having various open accounts counts for 10% of your credit score. For lenders and creditors who see that you have a diverse credit mix, this shows that you’re able to manage different types of credit accounts responsibly over a course of time.
Don’t close accounts
If you have paid off an account, it’s important to leave the account open otherwise it could negatively impact your credit score. It’s best to keep unused credit accounts open – like a department store card – to show lenders a longer average credit history. This will ultimately benefit you with a larger amount of available credit, if ever needed.
Not sure where to start? Talk to one of our loan officers today! As certified credit counselors, we can recommend ways to improve your credit and also offer best practices for money managing! Call us today at (409) 276-2525.