Are your credit scores lower than you want them to be? You’re not alone. Most working adults go through a phase when they need to work on their scores. The good news is that it’s relatively simple and painless to get started on the road to those higher numbers. What can you do right now to begin? Here are five techniques that work for most people.
Minimize Credit Card Usage
A big chunk of your credit rating is based on how well you use credit. This is particularly true for plastic cards. If you currently have multiple cards, consider getting rid of the high-interest ones.
Next, keep usage to less than 30 percent of your available credit. That’s sort of a magic number because all three of the major bureaus view it as the cutoff point for “smart” usage. For example, if you have an ABC Company card with a $1,000 limit, don’t stray above the $300 level of usage in any given month. Even better, try to pay card balances to zero when the bills come due.
Don’t Apply For More Credit
This factor isn’t a major part of your scores, but it’s in the moderate category, for sure. Avoid the temptation to apply for additional credit when you’re in a financial bind. Yes, it’s easier said than done, but the point is you’re just digging a deeper hole by applying.
Plus, even if you’re not approved for the loan, the new card, or the higher credit limit, you’ll typically get hit with a “hard pull” on your credit report, which drops scores about five or ten points immediately.
Pay Bills On Time
This is more of a defense than an offense, if you compare credit improvement to a game of football or basketball.
Paying bills in a timely fashion won’t boost your scores right away, but missing payments on things like auto loans, mortgages (especially), and utility bills can ding your scores almost instantly.
Stay Employed
This is another long-term strategy and has particular importance if you ever apply for a mortgage. Continuous employment, with gaps of no more than a few months between jobs, will make you much more credit-worthy, even if it doesn’t directly affect scores and ratings on your three credit bureau reports.
Another benefit of striving for continuous employment is that you’ll always have a stream of income with which to pay bills and live your life.
Be Careful With Mortgages
As noted above, paying your mortgage on time is of the keystones of good credit. Missing one or more house payments can wreak havoc with your ratings and make it hard to get back on track within the year. One way to deal with high house payments after a job loss or decrease in salary is to renegotiate the contract.
If your scores are especially now and you’re in serious debt, or facing major financial problems, consider consumer counseling. Most cities have social service agencies that can hook you up with no-cost advisors who can show you how to deal with your personal financial situation. Never lose hope because there’s always a solution.
