Follow These 3 Steps To Improve Your Credit Score


Your credit score is important. It can determine whether you land your dream apartment, what cell phone plan you’re entitled to, and what interest rates you’ll pay on loans.

This is because your credit score is taken as a measure of the likelihood that you will repay the money you borrow from a lender. The higher your score, the less risky it is to give you money. The worse your score, the less it seems like you will pay it back on time.

“Credit scores can predict with great accuracy the likelihood of someone defaulting on a loan,” Rod Griffin, senior director of consumer education and advocacy at Experian, told CNBC. “He gives [lenders] a digital representation of the risk associated with lending to you. “

The average American has a credit score of 711, according to ValuePenguin, which is rated “good” by the FICO credit score breakdown. But if you look at your score and see room for improvement, here are three things you can do to start rebuilding your credit.

1. Pay your balance on time, every time

There is no faster way to hurt your credit score than to miss payments, which is why you should always make sure you pay your bill on time. Setting up automatic payment can be extremely helpful when getting a new credit card; it helps you demonstrate that you are a reliable borrower.

If you have a history of late payments, it will take more than one on time payment to help restore your credit score. “Your score examines behavior over time, not just what you did today,” says Griffin. Make a habit of paying your bill on time and never miss a payment.

While it’s ideal to pay off your balance in full if you can, in order to avoid accruing interest, the minimum payment will still show up as a payment made on your credit report. It’s better than missing a payment altogether.

And if you normally pay your bill on time but for some reason are a few days late with a payment, it is worth contacting your credit card issuer ahead of time to let them know. and ask him if he can’t report it to the credit bureaus. .

2. Keep your balance low

In addition to making sure you always pay your credit card bills on time, keep an eye on your statement amount. To lenders, using a high percentage of your line of credit – a number known as the use-of-credit rate – could be a sign that you are a risky borrower.

Generally, experts recommend having a credit utilization rate of less than 30%. This means that if you have three credit cards with combined lines of credit worth $ 10,000, you don’t want to put more than $ 3,000 in total each month.

“Lenders get nervous if your balance is using too much of your available credit, because the closer you get to the maximum, the more it can be a sign of financial trouble for you,” said Matt Schulz, credit card expert at LendingTree. CNBC do it.

If a borrower with a high credit card balance experiences an unexpected event in their life, such as job loss or a medical problem, it will be more difficult for them to pay off the balance.

If you get a raise and start making more money, you should let your card issuer know because it can increase your line of credit, says Schulz, especially if you reliably pay your statement on time. Having a higher line of credit will allow you to increase your spending without hurting your credit score.

3. Examine your credit report for any errors

Your credit score is based on the information in your credit report. Schulz recommends reviewing your reports from the three major bureaus at least twice a year – once in the summer and once in the winter – to make sure there aren’t any mistakes that lower your score.

“People would be really surprised how many errors are on their credit report,” he says, advising consumers to keep an eye out for payments that might have been mistakenly marked as overdue.

These errors “can have a significant impact on your credit score,” says Schulz, and correcting them can result in an increase of 50 points in some cases.

“These errors are not malicious, they are just human errors and it is up to each individual to check their credit report from time to time to make sure everything is looking as it should,” explains Schulz.

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