November 13, 2019

There’s going to come a time in your life (if it hasn’t already) when you’ll need to borrow money in order to make a large purchase. For example, few people are able to pay for a car or a house out of pocket. When this time comes, you’ll need to speak with a lender.

7 Ways to Improve Your Credit Score

They will determine how big of a risk you are by checking your credit score. Unfortunately, if your credit score is low, your loan may not be approved. Even if it is, your terms may not be good. It’s why raising your credit score is so important. With that in mind, the following are the seven best ways to improve your credit score:

1. Don’t Ever Miss a Payment

If you don’t pay a bill, it will eventually be sent to collections, which will have a negative effect on your credit score. If you can’t pay a bill, contact the creditor to try and come up with a payment plan in order to avoid collections.

2. Pay Your Bills on Time

If you’re more than 30 days late on a bill, it will affect your credit score as it will be reported. This indicates a lack of responsibility to creditors and lenders. You can avoid paying your bills late by automating the payments on things like your credit cards and utility bills. This means that money will be taken from your checking account automatically to pay for these bills on a certain date.

3. Get a Credit Card if You Don’t Have One

Having no credit is almost as bad as having bad credit. Don’t be afraid of having a credit card. Just use it responsibly. For example, only use it for a specific purpose, such as paying for gas for your car, and then make sure to pay it off every month. Credit cards can also be helpful to have in the case of a financial emergency.

4. Keep Credit Card Balances Low

A high credit utilization ratio will hurt your credit score. Try to keep your credit card balances below 30 percent to keep them from affecting your score.

5. Avoid Applying for Too Much Credit

It’s good to have a mix of credit, such as a few credit cards and a small loan that you’re paying off. However, don’t just apply for more credit cards in an attempt to lower your credit utilization ratio. Every time you apply for a new credit card, it will ding your score.

6. Don’t Close Credit Card Accounts

When you pay off the entire balance on a card, don’t close it. Closing a credit card will result in the elimination of credit from your overall credit availability, thereby hurting your credit utilization ratio. If you’re trying to pay down your debts, keep the cards you pay off – just don’t use them.

7. Fix Credit Report Inaccuracies

The best way to check your credit score is by requesting a credit report from one of the three major credit bureaus. You can request one free report a year. Besides looking at your score, look through your entire report. You may find mistakes or inaccuracies that could be hurting your score. Report them to have them removed from your report, thereby improving your score.

These are the seven best ways to improve your credit score. Improving your credit score will provide you with more financial flexibility and could potentially help you save money when it comes to the interest rates offered for any loans that you want to take out. For more information about improving your credit score, contact us at Safe Money Partners today.

photo of Jeff Mohlman

By Jeff Mohlman

Jeffrey has developed a comprehensive network of financial planning and estate planning experts who work for their client’s short-term and long-term goals. Today, the approach he incorporates for his clients follows three basic tenets: 1) being debt-free, 2) maximizing after-tax retirement income, and 3) protecting their estate from unforeseen risks.