Take These Steps to Improve Your Credit Score

There are many different ways that your credit score will impact your financial future. It dictates the interest rates you receive on loans, what you are charged for insurance premiums, and whether or not you cane approved for various utility accounts. Maintaining a strong credit score will help your finances overall and save you lots of money. Take these steps to improve your credit score and enjoy the benefits of being qualified for the best financial products.

1- Make Your Payments on Time

The best piece of advice for improving your credit score is to pay your bills on time. The timeliness of your payments attributes to 35% of your credit score. One payment that is late 30 days or more will have a significant negative impact on your score. Avoid paying your bills late and watch your credit score rise.

2- Minimize Your Debt

In order to generate a credit score, you do need to have a history of having debt and making timely payments. However, you do not want to have too much debt. Thousands of dollars of revolving debt will be a red flag for financial institutions. It will be a sign of financial irresponsibility or struggles.

Too much debt will drive down your credit score as well. Your utilization ratio affects your credit score. The utilization ratio is calculated by dividing the balance on your account by the amount available. Try to keep your revolving balances below 50% of the available balance.

3- Have Diverse Trade Lines

Another way to improve your credit score is to have different types of credit tradelines on your report. Try to balance your debt by having a couple of credit cards, a couple of installment loans and a mortgage loan. Having different types of credit will strengthen your credit score.

4- Stop Applying For New Credit

If you are trying to improve your credit score, you should stop applying for new credit. Each time your credit is pulled there is a credit inquiry reported to your credit report. 10% of your credit score is affected by the number of inquiries on your credit report within the last 6 months. Avoid applying for financing at every store in the mall. If you are shopping for a mortgage or a car, do your credit inquiries within a couple of weeks to avoid a hard inquiry for each loan application.

5- Pay Off Any Existing Collections, Liens or Charge-Offs

Any outstanding delinquent loans or accounts that are reporting to your credit will significantly drop your credit score. Even as time passes since the delinquency you will still have the outstanding balance showing on your report. Pay off existing collections, liens or charged off loans on your credit report. You will see your credit score jump immediately after paying them off.

6- Give It Time

One of the factors in the algorithm calculating your credit score is time. After you’ve followed the advice listed above, you need to give your credit time to steadily improve. Each month that you practice good financial habits and pay on time, your score will increase. The time will show that you have maintained this financial responsibility for a longer period. It will solidify that you have good financial practices.

Maintaining strong credit is possible with some knowledge and diligence. Call Carolina Money Minders today, one of our finance professionals can take a look at your credit and discuss how it will impact your financial future.