Your credit is one of the most important things tied to your name throughout your lifetime. It will get you access to the best credit cards, the best interest rates for loans and mortgages, etc.
I once heard that the lower someone’s credit score is, the higher they can increase it in little time. Someone with a score in the 500–600’s will most likely increase their credit score in very little time if they follow the following points:
1.) Make frequent payments throughout the month
Making frequent payments throughout the month helps with credit utilization. Your credit utilization is a percentage of your overall available credit line. I personally will make small payments of anywhere from $50-$100 throughout the month to help keep my utilization rate low, and then pay off my cards in full at the end of each month. Rule of thumb — keep your utilization rate below 30%.
2.) Any errors on your credit report — dispute them
Mistakes happen — I’ve seen it many times. Errors could be affecting your score without you even knowing. Dispute them and remove them (that rhymes. The three major credit bureaus are Equifax, Experian, and TransUnion. You are allowed one free report every year. Make sure there are no errors on there.
3.) Credit history
The longer you’ve had credit for the better. Having a history of credit with timely payments will only benefit your credit score and help you get approved for loans. This shows the lender that you’re a reliable customer whom they could trust to make timely payments. Someone could potentially lose out on a loan if they don’t have a solid credit history.
4.) Raise credit card limits
Be careful here. If you call and ask your credit card company to raise your credit limit with a soft inquiry, that’s great. A hard inquiry will affect your score intensely. Raising your credit card limit will help when it comes to credit card utilization and overall help with increasing your score. Credit card companies want to work with you, and nothing will happen unless you call and ask for what you want. I’ve had some of my readers tell me they were able to remove interest from some of their accounts. It’s possible, you have to negotiate and ask for what you want.
5.) Don’t close old accounts
You might not want to hear this — but don’t be in a rush to pay off your student loans. It’s most likely the longest account you have, since you started accumulating them around age 18–19. Well, at least most people. Once paid off — it may lower your score.
Also, don’t close credit cards you never really use. Closing credit cards will lower your credit limit and most likely increase your credit utilization. Think, before you close a credit card. I would keep it, especially if it doesn’t have an annual fee. No harm in doing that. It will only benefit your credit score and history.
Final thoughts
Your credit score is important. It could make or break you when it comes to getting approved for the best rates. A great credit score will make a tremendous difference over the life of any loan you receive. Use credit responsibly because it could be of great advantage to you throughout your lifetime.