Four Ways to Improve Your Credit Score

Marco Green
January 22, 2020

Two little words govern much of what you can buy and do in your adult life and those are credit score. If your score is low, you could be denied loans, mortgages, refinancing and it can even affect your ability to secure an apartment. Some occupations even take a look at your financial history before hiring you on as an employee, especially if you'll be working with clients' money. Increasing your score doesn't have to take years or decades with the right strategy in place. However, once you work on improving it, it's important to avoid any pitfalls that could undermine all of your hard work.

Take Out a Credit Card or Personal Loan

The quick and easiest way to build financial value is to either open a credit card account or to take out a personal loan. Not only do both of these options provide you with additional money that you can use to buy things or to get projects done, but paying them off helps to establish your financial history. You'll have an easy monthly payment that can be paid off quickly. Most of these lenders will report your account's activity to several of the more prominent reporting agencies, and your score will begin to go up after making just one or two payments on time.

Don't Close Out Unused Accounts

You might be tempted to close out an account that you're not using and shred the card that you have in an attempt to avoid spending with it, but this can be detrimental to building financial worthiness. Any time you close out an account, even if it's unused, your score will take a hit. If you close out multiple cards, you'll undo all of the hard work you've accomplished over the past few months or years. Plus, it's always good to have this monetary availability in the event of an emergency. If you're afraid of fraud, many companies have inactivity security features available to freeze use so that the card cannot be used.

Keep Balances Low

Reporting agencies like to know that people are using their lines of credit, but not too much of what's available to them. Generally speaking, you should aim to use no more than 30 percent of your available credit. If you use more of this, the lender may see you as a risk and it'll affect your financial standing in a negative way. The best way to keep balances low is to have them paid off quickly and efficiently. Sure, there may be a time or two when you have to max out your cards for emergency reasons, but this shouldn't become a habit and your goal should be to pay everything off as soon as possible.

Pay More Than the Minimum

You just charged $1,500 to one of your plastic accounts, you go to pay your monthly bill and realize that you only have to put $25 towards the balance to be considered in good standing. The issue that many people have is that they only pay the minimum of what's due. While this won't have a negative impact as far as a late fee is concerned, it will eventually affect your score. The best way to get your current rating to go up is to put more money towards balances due, regardless of what the minimum payment is.

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