Improving your credit score takes time. An excellent score can help you qualify for low-interest loans and premium-rewards credit cards. You can get started by checking your credit score to see where you currently stand. Here are five tips to begin building better credit:
Stay on top of payments
Keep your debts in the green to show lenders you are responsible with credit. According to Experian, payment history is the most influential factor for both FICO and VantageScore, the most common scoring systems. Credit scores reflect your ability to pay back debts effectively. From a lender’s perspective, an established history of timely payments is a good indicator you will handle future debts responsibly, too.
Keep tabs on your credit-utilization rate
Weigh your balances relative to your credit limit to ensure that you are not using too much available credit, a practice which can indicate risk.
Credit utilization is one of the most influential categories that influence your score. Your ideal rate may vary depending on the scoring system used. If you struggle with high balances, consider consolidating with a 0% introductory rate balance transfer credit card.
Leave old debts on your report
Once you get rid of student debt or pay off your auto loan, you may be impatient to get any trace of it wiped from your report. But those debt records may actually help your credit score. “Having an account with a long history and solid track record of paying bills on time, every time, are the types of responsible habits lenders and creditors look for,” said Nancy Bistritz-Balkan, a vice president at Equifax.
Take advantage of score-boosting programs
The number and average age of your accounts are both important factors in helping lenders determine how well you handle debt. Experian Boost and UltraFICO allow consumers to boost a thin credit profile with other financial information. After opting into Experian Boost, you can connect your online banking data and allow the credit bureau add telecommunications and utility payment history to your report.
Time your applications carefully
Every time you apply for a new line of credit, a hard inquiry is pulled on your report. This type of inquiry lowers your score temporarily. TransUnion said the effects can last up to 12 months. Research your likelihood of approval to ensure you’re a good candidate before applying for a new credit card.