René Nourse, CFP®
A good credit score can go a long way—but what exactly is a “good” score? And how can you improve your score when you’ve had some financial mishaps along the way?
Most credit scores are between 600 and 750, with anything above a 700 suggesting good credit management. Credit scores are affected by elements in your credit report such as number and severity of late payments, type and age of accounts, total debt, and public records. Manager of Analytics for Experian, Arlene Dang explains that the biggest driving factor to a score is delinquency payments or payment history.
Maybe you have had a great financial run and your credit score is well above 700, or perhaps you are like many others who felt the effects of the stock market downturn and have struggled to maintain your payments consistently. Whatever the reason for your low credit score, the good news is that you can take steps to improving your score over time. There is no quick fix, but through consistent effort you can improve your score and get back on the financial fast track.
Here are 5 fast fixes to improve your credit score:
1. Pay Your Bills on Time
This may seem like a no-brainer, but this is the most important thing you can do for your score. Late payments, even by a day, can have major negative implications. If you are having trouble making ends meet, contact your creditors or make an appointment to see a legitimate credit counselor. You can even work with your creditor to set up automatic payments to ensure your bills are paid on time.
2. Keep Your Credit Card Balance Low
Yes, it is important to have credit cards, but don’t run up high monthly charges. Outstanding credit card debt affects your credit score and shows signs of potential failure to pay. Also, don’t move your debt around; be diligent in keeping it low and paying it off each month.
3. Don’t Open a Lot of New Accounts
New credit accounts will lower your average account age, which can have a negative impact on your score. Rapid account buildup appears risky if you are new credit holder.
4. Shop Around for the Best Rate
It’s OK to shop around for the best rate for a given loan within a specified period of time. Don’t take the first offer on the table. Make sure you get the best deal possible so you aren’t left with high interest payments.
5. Don’t Close Accounts to Improve Your Score
Closing an account doesn’t make it automatically go away. A closed account will show up on your credit report and may be considered by the score.
The biggest takeaway here is that you must be financially responsible to earn a good credit score. The first step to improving your score is knowing where you currently stand. Get your free credit report from www.annualcreditreport.com and start taking the necessary steps to improving your number today!
Image Source: freedigitalphotos.net, jannoon028