Credit scores are becoming increasingly important in today’s society. Credit scores range from 300 to 850, and the higher the score the greater the score. Many adults, particularly new adults, are finding it difficult to know how to raise their credit score. To understand how to do this, we first need to back up and take a look at credit scores—what they are and how they work. A credit score is basically a record of how reliable a person is at paying off credit and giving payments. It’s so important to have a good credit score because if you need to finance something, a bad credit score could be what stands between you and that new house.
To have a good credit score, you need to remember the following:
*You need to have a good track record of keeping on top of your payments, whether it’s for student loans, an apartment, or car or credit card payment.
*You need to keep in mind your credit history’s length.
*New credit and types of credit you have used go into your credit score, so keep that in mind as well.
It’s also important to know that there are multiple credit-scoring models, but the one that people typically go by is the FICO credit score. You have three different credit scores under the FICO model (from each of the three credit bureaus giving reports).
So, gathering from the previous list of what makes up a good credit score, where do you go from here? In order to improve your credit score, you can do the following:
*First, review your credit report. Check it for errors, such as late payments that are incorrect or any other issues. Make sure everything is right and then you can go from there.
*Make payments on time and take the necessary measures to remember these payments. Give yourself reminders of when payments are due, or set up automatic bill paying services so your payments all go out on time.
*Avoid using credit cards as much as possible, and pay off what you do owe in credit. It’s hard to avoid using your credit card, and you need to use them and pay them off if you are going to build up a credit score at all. You just need to make sure you use them wisely. It’s easy to go on a shopping spree and think about paying later, but it’s important to never spend what you don’t have. If you are thinking of using your credit card to help build up your credit, you should make purchases with your credit card and then immediately pay off what you spent. That way, you won’t accrue interest or a high credit card bill but you will still build up a good credit score. Remember, though, that just because you pay something off doesn’t mean it will be erased from your credit score. It will stay on there for around seven years.
*It may seem like a good idea to close a credit line or card to save money and stay in good habits, but in the long-term this isn’t a good idea to help build your credit score, as you will still need to use these lines to build up your credit score. Just control your spending and do what is best for you.
*On that same note, though, don’t open up a large number of credit lines to build up your score. This could get you in a heap of trouble by causing the temptation of spending a lot of money that you don’t have that will negatively affect your credit score while building up your debt.
*Get caught up on any bills you may be behind on. Be sure to stay on top of your bills at all times and stay current.
*New accounts actually affect your credit score because your credit score takes the longevity of your lines into account in your score. So, if you are trying to open up new accounts and lines to give your credit score the opportunity to grow, this actually may negatively impact your score instead of helping it out. It may be helpful for you to seek the counsel of a financial advisor to ensure you are doing what is best for your own personal situation.
*If you are wanting to start anew and are looking at helping out your credit score in the long run, paying off your old account and starting new credit lines, and staying on top of them, could be very beneficial to your credit score over time.
*As mentioned before, it depends on your own individual circumstance of whether or not you should open a new line of credit. If your situation would benefit from doing this, just make sure you open credit lines only as you need them.
As you can see from this list, there are many different tips to keep in mind to raise your credit score and keep it at a good place. Keep these tips in mind and meet with someone who can help you with your personal financial situation so you can do what is best for you and your credit score.