We all dread low credit scores, it’s like getting an F on your school report card. Credit scores are a three-digit grade you get on a scale that ranges from 300 to 850. Your score indicates your “creditworthiness” to potential lenders, banks, landlords, insurance companies, and even to some employers. For some, credit scores are more like a driving record: it takes into account years of past behavior, not just your present actions. Either way, the higher your score, the better. Fortunatley, we all can do something to raise our scores. So just how do you build your credit score? Here are some simple ways:
Reduce Credit Card Balances
One of the major factors in your credit score is how much revolving credit you have versus how much you’re actually using. The smaller the percentage this is, the better it is for your credit rating. To boost your score, “pay down your balances, and keep those balances low,”. If you don’t have the funds to do that, consider taking a loan from a family member or friend.
Always Pay Bills On Time
Delinquencies have the biggest negative effect on your credit score. If you simply forget to pay your bills on time, it will affect your credit score negatively. Consider setting your bills up for automatic withdrawal from your checking account. If you have overdue bills, make plans to get them caught up.
Use your calendar
If you’re shopping for a loan, it pays to do your rate shopping within a short time span. Every time you apply for credit, it can cause a small dip in your score that lasts a year. That’s because if someone is making multiple applications for credit, it usually means he or she wants to use more credit. Since your credit score gets pulled when you shop for a loan, submit applications to potential lenders within a two-week period.
Never Max Out Credit Cards.
Keep your balances below 30% of your credit limit—even if you pay them off in full each month. For example if you have a card with a $3,000 credit limit, don’t rack up a balance that exceeds $900. It’s better to have two cards with balances that are each below 30% of your limit, than to have one card that you consistently max out.
Don’t Close Unused Credit Card Accounts.
Canceling a card can actually lower your score. A better strategy is to occasionally use your older credit cards so the issuer doesn’t stop reporting your information to the credit bureaus. Having a long credit history actually helps increase your score, so do hang on to older cards.