Do you know your credit score? If not, it’s worth taking the time to find out. Credit scores are a reflection of how well we manage our finances and can have a significant impact on everything from getting approved for loans or mortgages to what interest rates we pay. The good news is that there are things you can do every day to help improve your credit score!
Tips for Cleaning Up Your Credit Score
Break the Problem Into Manageable Pieces
The credit score is a number that measures your ability to repay debts. It is calculated based on your debt repayment history, the length of time you have had open lines of credit, and the types of accounts you have open. A high credit score means that you are well-managed with low risk for creditors; conversely a low credit score can indicate an increased risk for creditors and possible higher interest rates or even denial of some loan requests.
Pick One Debt and Attack It Head On
If you’re reading this, chances are that you’re feeling overwhelmed by debt. You don’t know which debt to pay first or how much money to put towards it. The good news is that there is a solution for your problem: pick one debt and attack it head on!
Raise Your Credit Limit
Credit is something we all need to function in today’s society, but often there are misconceptions about how it works. Did you know that using a small portion of your credit limits can help raise your credit score? As a general rule of thumb, keeping balances below 30% on any card account could be very beneficial for the long term and should help with some lower scores! Paying down cards before their due date or limiting when they’re used will also have an effect on this number as well.
Don’t Cancel Credit Cards
Cancelling cards that are paid off or not being used can lead to a lower credit score. When you cancel your card, the balance on it decreases and is no longer included in your total debt ratio for calculating this number. The more balances there are on each card account reduces their individual impacts when they come into play with other factors such as payment history, types of accounts opened by consumers (e.g., student loans), etc. which all affect how much risk banks believe our borrowers pose them if we take out new lines of credit from those financial institutions.
