Whether you want to buy a house or recover from a bad credit history, achieving a good credit score is a goal anyone can accomplish. A good credit score reflects your financial health. It can make renting an apartment or leasing a car easier. It can also get you better loan rates. There is a lot of advice out there on how to improve your credit score, but one of the simplest ways is to pay your credit card bills on time and use your credit cards sparingly. If you want to go further to repair and optimize your credit score, we have a few favorite tips to share with you:
- Reduce your credit utilization ratio.
The credit utilization ratio is the difference between how much credit you’ve used and how much credit you have left. It has a huge impact on your overall credit score. So, if you have a card that’s at its monthly limit and it’s the highest balance you carry, pay that card down as much as you can to reduce the debt. That reduces your ratio and improves your score.
You can also reduce your utilization ratio by requesting a credit limit increase on your cards. However, if you have a habit of maxing out your cards every month, avoid increasing limits to prevent overspending. Instead, work towards reducing your debt and use credit cards sparingly.
- Review your credit report.
Make sure you request your free credit report every year, which includes information from each of the three reporting agencies, Experian, TransUnion, and Equifax. Also, requesting one will not affect your credit score. When you receive your report, look for any errors and dispute them. Removing false information will improve your score. Some of the most common errors include a misspelled name or address, or accounts in someone else’s name. Others include accounts that have been incorrectly reported as late payments, debts listed more than once, and closed accounts that remain open.
- Pay your bills on time.
It’s worthy of repeating – pay your bills on time. Most importantly, if you find that you are unable to pay your bills at the moment, contact your creditor immediately. You may be able to negotiate a different due date to make on-time payments a bit easier.
- Avoid getting new credit cards.
Although opening a new card can increase your overall credit limit, applying for a card adds a hard inquiry to your credit report. Too many of those will negatively impact your score if done too often. That said, consider another type of credit you don’t already have. For example, consider a small car loan if you only carry credit cards. Get a credit card if you only have loans.
Improving your credit score is a worthy goal, especially if your long-term goal is to purchase a home or a car. However, keep in mind that improving your score does take time.