No matter if you are applying for a mortgage, leasing a car, getting a credit card, or even car insurance, credit score is the first thing that companies will factor in their decision for your approval or denial. Sure, income is important, but credit score is really our first impression that basically sums up our history as borrower in a number, and the higher the credit score, the better access you will get to the most favorable rates on the market. Having a high credit score is so important, the difference in a 3% interest rate versus a 4% could be thousands of dollars in interest a year depending on the balance. You don’t want to pay any more interest than you have to, so strive for giving your credit score a boost to reach credit score perfection.
Review for Accuracy
With the amount of hacking that occurs these days, in fact there was just another the other day that Equifax had been compromising, possibly affecting HALF of the American population, which is scary that all of our financial information that has been reported is now out there in someone’s hands, so it’s important that you review your credit report to ensure that all of the information is accurate. You are entitled to a free copy of your credit report each year from the major bureau’s, but as far as your score goes you can see it monthly on your credit card statement.
Make Regular On-Time Payments
Payment history is a large chuck of your credit score, so you want to make sure that every payment is made on time, otherwise if you slip up and are more than thirty days late, it will be reported to your credit report, and that ding could stay on there for up to seven years. While a late will not be reported to credit prior to thirty days, but you could be charged a late fee if even a day late, and there could be an interest rate spike.
Stay Out of Debt
Just as important as payment history is the window between the amount of debt carried and the available credit available, so the closer you reach the credit ceiling, your credit will be lowered considerably. While it may be common sense to stay out of debt, if you do carry debt, it’s time to set up a payment plan and timeline so you can finally get out of debt, and stay out. The larger the payment you can make each month will be applied towards principal, so it will mean cutting back spending in other areas so you free up more money to work on paying off debt.
Leave Accounts Open
When you finally do pay off debt, which is an incredible feat that is worth celebrating (hopefully by not going on a spending spree), the first instinct might be to cut up and close the card so you never have to worry about going into debt again. The problem with that is that by closing the account, you are now removing all of that available credit from your overall, so if you carry a balance on another card your score can now be reduced, even though you paid off and closed the other. If you don’t want to use that card the best bet would be to cut up the card, but leave the account open.
Limit Credit Applications
While not as much of an impact as payment history and debt, credit applications that are filled out and have credit pulled, will put an inquiry on your report, and that can take up to two years to come off. If you are comparing offers it’s best not to have your credit pulled until you are sure you are proceeding, that way you don’t have to worry about giving lenders the impression that you are loading up cards to go on a spending spree, even if that’s not the case.
Pay Twice a Month
If you use your credit card for all purchases made in a month, which can be financially smart, earning rewards on the purchases that you are making anyways, may actually look bad on your credit score, because your information is reported every month, and if you have a balance at that time, it could get reported, even if you pay off every month. If you want to keep the balance down and score higher, try paying down your credit card a couple times a month, that way you can keep it lower than charging all month.
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