Believe it or not, a lot of people would have no idea of even what range their credit score is in, let alone on how to start working to improve it. Your credit, however, is important in a number of ways. Having good credit can qualify you for a home or car loan, and affect nearly every other aspect of your life, even your employment and taxes. So how do you make sure that you get, and keep your credit in good standing? Follow this 6-step guide to help you get started today.
Pay your bills on time. Paying your bills on time, or within your set grace period (if the company or creditor affords you one) is one of the best ways you can help your credit score. Your payment history accounts for up to 35% of your total credit score, so it is imperative that you make an effort to pay on time. If you have been sitting on a few bills for a while, say more than 90 days, your account might also have already been referred to a third-party collector, which can seriously harm your score. Start with those bills that are the longest past due and start working to repay them as best you can.
Get a credit card. It might sound contradictory to your cause, but getting a credit card and making payments on time is a surefire way to improve your credit score. But you have to make your payments; otherwise the entire process is pointless. You will need to apply for one with your bank or creditor. If your credit is good enough to qualify you for one, it means your score is in fairly decent standing, so make sure you work to keep it that way.
Do not open any new accounts. Whenever you apply for a credit card, the bank or creditor does a check on your credit, which involves looking over all of your accounts to discover your credit health. If you have multiple open accounts, there will be multiple checks carried out. Having multiple checks processed on your accounts has the potential to affect your credit in a negative way.
Limit your use. Even though getting a credit card is an excellent way to get out of debt, you should also keep an eye on how often you use it. Maxing out a new credit card won’t do your credit any favors. Up to 30% of your credit score is determined by your utilization rate, and the lower your rate, the better your score. Your rate can be determined by dividing your credit balances with your credit limit. If you land somewhere between 0-20%, you’re all good, but if you come in a little higher, try limiting the expenses on your card.
Do not close old accounts. Your credit history comprises up to 15% of your overall credit score. That being the case, having old credit accounts is actually good for your credit score. Most people figure that to open new accounts it is only logical to close their old ones. Doing this, however, actually narrows, or shortens your credit history, which can negatively affect your overall credit score.
Work with your creditor. No matter how much you try, life can still get in the way of your getting out of debt. When life happens, be sure to reach out to your creditor to negotiate a payment plan. Falling behind on your payments can directly affect your credit score, but if you are in regular contact with your creditor they will be much more willing to help you out. Let them know if you lose your job, and ask for a good-will adjustment, or to withdrawal any notices sent on your behalf to third-party collectors.
Having good credit is essential to living in the modern world. If you are dealing with bad credit, however, there are plenty of ways to improve your score and get your credit back on track. Follow these steps, and ask for help when you need it from a trusted family member, or contact an experienced financial planner from Assured Retirement Group.
If you have any questions about Financial Advisor Minneapolis feel free to come pay us a visit!
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