You typically don’t think about credit score and income being in the same category, but the truth is, the interest rate you are currently paying on, whether it is your mortgage, auto loan, or credit card, factors in with your credit score. In order to take advantage of the best rates on the market, you will need to have excellent credit, so that does take some work on your part. Credit score is the first impression that we can give to a lender, so whether it is insurance, loans, and even potential employers are pulling credit to give a full picture of your financial history. Maybe employers feel that any financial irresponsibility’s could lead to other personality issues and may not be a good fit as a candidate. No matter the case, whether you have great credit, or have issues, we can always strive for the best credit score we can, because after all, why pay any more in interest than you have to.
Make All Payments on Time
Sure, that may sound like common sense, and maybe it is, but if you have any late payments (which are thirty days past the due date to show up on credit), they can not only immediately lower your credit score, but take years to come off your credit report, even if you do begin to have a good payment history. So, if you had issues in the past, let’s leave them behind you and have a clean payment history going forward.
Increase Credit Availability
Basically, what this means is that your credit score factors in a great deal of your current debt compared to what you have available. So, if you are close to your credit limit, you are significantly lowering your credit score, so the next step is to begin paying off your debt, without continuing to charge up the account. Once you do pay off a credit card, your first reaction may be to close the account now that it’s down to zero, but actually this can hurt you. By closing the account, you will be removing this available credit, so you could actually be lowering your score while you think you are making the responsible move.
Avoid Opening New Accounts
Credit inquiries make up a portion of your credit score, so whenever you fill out an application and credit is pulled, that review could lower your credit score and take a couple years to come off. So, unless you are serious with following through on the account, you should avoid filling out applications just to check. It could give lenders the wrong impression that you are trying to open many accounts and go on a shopping spree to charge up the accounts.
How Quickly Will I See Results?
If you are making life-changing financial behavior changes for the better in order to boost your credit score, then I applaud you, but let me warn you that you may not see results overnight. Keep in mind, that credit bureaus are usually a month or two behind, so any activity on your accounts may not catch up just yet, so don’t panic if you don’t see immediate improvement. Having perfect credit comes with years of patience and discipline, that will not happen in a couple of months of now deciding to make a change. Hang in there though, it will be worth it when you have great credit and can take advantage of the best rates on the market and lower your monthly payments compared to what you are currently paying, which equals more income in your pocket.
What’s the Best Way to Check My Credit?
If you are looking to pull your credit report to review to ensure it is accurate, which you should do at least once a year, each of the three major credit bureaus will provide a copy free of charge once a year. Your credit score will not be included though, but you can get with an extra charge. If you have a credit card account though, most creditors are now putting your credit score on the monthly statements, so you can see where you are currently at and monitor each month on your progress. The bottom line is that you need to be responsible with your finances, and living within your means and not overspending is a great way to start. Not only will you stay out of debt, but you will avoid paying interest on a balance that you need to carryover each month because you are unable to pay the balance.