Your credit score is a three digit numbers that follows you everywhere. It comes into play when qualifying for credit cards, mortgages and personal loan rates. It may be reviewed when applying for housing, etc. If your credit score needs some improvement, here are six tips to help you out.
- Review Your Credit Report. This will give you a benchmark on where your credit stands today. It also helps you identify what might be working in your favor, or against you. You can obtain a copy of your credit report from each of the three major national credit bureaus: Equifax, Experian and TransUnion.
- Deal with Delinquencies. If you have delinquent accounts, charge-offs or collection accounts, take action to resolve them first. If you have charge-offs or collection accounts that can’t be paid off in full, offer the creditor a settlement. Negative account information can remain on your credit history for up to seven years.
- Create a Payment Strategy. More than 90% of the top lenders use FICO credit scores, and payment history has the biggest impact on your FICO credit score, making up 35% of the determination. A simple way to improve your credit score is to avoid late payments. To ensure you don’t miss a payment, create a tracking system for monthly bills, set due-date alters and if preferred, automate bill payments.
- Adjust Credit Utilization to 30% or Less. Credit utilization, or the portion of your credit limit that you’re using at any given time, is the second most important factor in FICO credit score calculations. Keep your credit utilization in check by paying your credit card balances in full each month. If you can’t always do that, keep your total outstanding balance at 30% or less of your total credit limit.
- Limit Hard Requests for New Credit. There are two types of inquiries into your credit history, referred to as hard and soft inquires. While soft inquiries, like checking your own credit, will not affect your credit score, hard inquiries do. Examples of hard inquiries include applications for a new credit card, a mortgage, an auto loan or some other form of new credit. These can affect your credit score for anywhere from a few months to two years.
- Keep Old Accounts Open. The age-of-credit portion of your credit score looks at how long you’ve had your credit accounts. The older your average credit age, the more favorably you appear to lenders. So, if you have old credit accounts that you’re not using, don’t close them. Closing accounts can knock a few points off your score.
If you’re looking for more tips, we have an episode of The Agent of Wealth Podcast dedicated to improving your credit score. Listen below.
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