Credit touches almost every facet of a person’s financial life. Unfortunately, some people haven’t made the best use of credit and as a result, have a less than spectacular credit score. Poor credit scores may keep you from being eligible for home or auto loans . If you are lucky to get a loan, expect to pay a high interest rate for it. Here are a few steps to take to help you improve, and prevent, a poor credit score.
Pay Bills before the Due Date
Waiting until the last minute to pay your bills only increases the likelihood of your payment being late. To avoid making a past due payment, simply pay your bills well before the due date. By practicing this habit, you never have to worry about late payments ever again. No late payments reported to the credit bureaus keeps your credit score from enduring any unnecessary hits.
Mix up Credit and Use it Wisely
If you have one credit card, great. Use it responsibly. However, having a nice mixture of credit on your credit reports can do wonders for your score. A mixture of credit means having both revolving accounts and installment accounts. Credit cards fall into the revolving account category. Loans, such as those for a home or automobile, make up the installment account category. For building a good credit score, it’s good to have at least one of each.
Stay Away from “Max”
With your credit cards, using them responsibly means keeping the balances they carry low. Try to use only 30% of your available credit limit. Never “max out” your credit cards. Using the maximum of your available credit leads to disastrous decreases to your credit score. High credit card balances scare away potential lenders. Creditors view it as if anything were to happen to your income, the last thing you would worry about paying would be your high credit card bills. This leaves them vulnerable to default. Stay on top of your credit card bills by keeping the balances down and paying more than the minimum balance due when you can.
The Older, The Better
The older your credit history, the better your score will be. If you have an older credit card that you haven’t used in a while, pull it out and put it to work. This gives the impression that you have been using credit wisely for a long period of time. Positive usage of an old, active account will provide your credit score with a nice little boost.
Check your Credit Report
Always be aware of what’s on your credit report. Make sure that it shows no errors, such as accounts that do not belong to you or incorrect reporting of account information. If you notice any errors on your credit report, begin to dispute the information as soon as possible. Also, when disputing, make sure to keep accurate records of any communication between yourself and the credit bureaus. Removing errors from your credit report will help improve your credit score.
Most states entitle you to receive one free credit report a year from the three main credit bureaus: Transunion, Experian, and Equifax . Make sure to review all three as some account information may appear on one report and not the others. Go to AnnualCreditReport.com for details on how to receive your free credit report.
Be proactive when working to improve your credit score. Paying bills responsibly and using credit wisely will afford the greatest benefits to your credit score. Doing these things over time will only compound their positive effects. Keep a high percentage of your available credit open by only using, at most, 30%. And check your credit reports annually at the very least. Start taking these steps today and before you know it, your credit score will begin to climb.