Your credit score matters –a lot. It affects everything from your ability to get a car loan to qualifying for a mortgage. If your credit score isn’t what it could be, then you should begin taking steps to repair it. It can take a long time to get your credit score to the level you want it to be at, so the sooner you begin, the better. Here are a few simple ways to improve your credit score.
1. Reduce your utilization ratio.
Your utilization ratio is the amount of credit used versus the total amount of available credit. For example, if you have a credit limit of $4000 and you have used $3500, you only have $500 of available credit. The ideal utilization ratio is below 30%. To continue this example, you would want to have you used only $1300 or less of your available credit.
2. Pay on time.
Making late payments affects your credit score. Many credit card companies will not report a late payment to the credit bureau unless you’re 20 days behind, but you should never cut it that close. Use calendar and always keep track of when your payments are due. An easy way to do this is to set up automatic payments.
3. Make sure your credit report is accurate.
You are entitled to one copy of your credit report per year free of charge. It is always a good idea to get this report and to review it for any items that are on the report erroneously. A study from the FTC found that one and five consumers had an error on at least one of their credit reports. When you find this error, get in touch with the relevant bureau and report it. Having the error removed will improve your credit score.
4. Keep cards open even after they are paid.
Even if you do not intend to use your credit card often, it is a good idea to keep it open. The longer a credit line has been in your name, the more effect it has on your overall credit score. An open line of credit is not necessarily a bad thing.
5. Stop applying for credit cards.
When you apply for a credit card or any new line of credit, your credit score takes a hit. A hard inquiry will stay on your report for a full year. Although the effect is small, repeated hits can add up and greatly affect your score.
You do not have to be bound by old credit mistakes. Start taking steps immediately to improve your score and squash bad habits so they do not affect your future.