7 Essential Tips for Safeguarding and Boosting Your Credit Score
Your credit score influences the interest rate you have to pay for loans or credit cards. Enhancing your score by just a few points can significantly impact the interest rate you will be charged for purchases. If you possess a high credit score, you’ll easily qualify for the best rates and terms on auto financing, home loans, and small business loans. Here are seven crucial tips to protect and improve your credit rating.
1 – Obtain Your Credit Report. Your credit score is based on your credit report; hence, start by ordering your reports and examining each for accuracy. You can acquire your reports from a service like MyFico.com or request them individually from Equifax, Experian, and TransUnion online or via phone.
2 – Verify Your Credit Report for Accuracy. Ensure the identifying information, such as name, social security number, birth date, and address, is correct. Confirm that old negative items and paid-off debts are removed. Check for discrepancies such as accounts or delinquencies that are not yours, late payments, charge-offs, lawsuits, judgments or paid tax liens older than seven years, and any negative information that doesn’t belong to you.
3 – Consistently Pay Your Bills on Time. Payment history constitutes more than a third of the typical credit score. If you’ve paid bills late previously, you can enhance your credit score by consistently paying your bills on time moving forward. Lenders seek any indication that you might default, and late payments signal potential financial difficulty.
4 – Maintain Low Credit Card Balances. Carrying smaller balances is an effective way to improve your credit score. The score calculates how much of your limit you utilize on each credit card or other line of credit, and how much of your combined credit limits you use on all cards. Within 60 days, reducing credit card balances can boost your credit score by up to 20 points.
5 – Avoid Opening In-Store Credit Cards. While your initial credit accounts can help build and enhance your credit history, each subsequent credit application may lower your score. New credit cards reduce the age of your credit history, and a department store credit card does not demonstrate strong creditworthiness. Every retailer’s credit card application negatively impacts your credit score.
6 – Be Cautious When Applying for Credit. Having at least one credit card that is more than two years old can improve your score by 15 percent. Ensure your credit report is checked only when necessary. If you’re shopping for a home, try to apply for loans within a two-week period. By keeping the loan process within this timeframe, all credit report inquiries are considered as one request.
7 – Do Not Close Credit Cards or Other Revolving Accounts. Closing unused accounts with outstanding balances without paying off the debt alters your “utilization ratio,” which is the total debt amount divided by your total available credit. This action reduces the gap between the credit you are using and your total available credit, potentially harming your credit score.
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