Your credit score is an extremely important piece to your personal financial health. You may feel that you need a higher credit score for a specific purpose like a new car or home purchase, but the truth is that a HIGHER credit score can unlock many savings and financial benefits for you.
Your credit score can decide on how much lenders will allow you to borrow, and the details of those loan agreements. A credit score that is too low can limit your access to credit cards with favorable terms, block your access to mortgages needed to buy real estate, increase your interest rates on money you already have borrowed, and more. Here are the top 5 methods to improve your credit score, and a bonus guide at the end, that if you currently have an average or low credit score, you CAN NOT afford to miss out on.
1. Pay your bills on time
Late payments are the single most important factor on your credit score. Even if you do everything else perfectly by the book, late payments can still hurt your score significatly.
If you miss a payment accidentally you should call the creditor right away and find out if they have a forgiveness policy. Some will even refund a late payment fee under certain circumstances.
2. Pay off Debt
Even if you are paying minimum payments on time, you still want to try to pay off as much debt as possible. This will lower your overall credit utilization, which is another important factor in your credit score. Try to make a budgeted plan to pay off your debt consistently based on your income and savings. Before you know it you will be debt free!
3. Don’t close unused credit cards
Do not make the mistake of closing credit card accounts that you do not use. Closing of an account can hurt your credit score. Closing an account will also immediately lower your total credit utilization by the amount of that credit line. Another tip is to be sure to use the account occasionally so that it does not get automatically canceled by the issuer for years of no use.
4. Pay Twice a Month
Paying off debt more frequently may work in your favor when improving your credit score, even if you technically pay the same amount at the end of the month. Not only is multiple payments a good way to budget towards reducing your total debt, each payment will immediately lower your total credit utilization.
5. Avoid New Credit Card Applications
When trying to raise your score it is not the best time to open new credit card accounts. While true that a new credit card may raise your total available credit line, and lower your credit utilization, a hard check on your credit from the application process will not be helpful while trying to improve your credit score.
Benefits of Improving your Credit Score (And the trick to doing it)
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