Having a good credit score will help you get the best rates on loans, credit cards and mortgages. A low score makes it difficult to rent an apartment or buy a car, while a high score can help save thousands of dollars throughout your life.
So how do you improve your credit score? Here are some steps that everyone can take for credit building cards:
Check your Credit Report
Unless you know what a credit score is or how it’s calculated, you won’t know the ways to use it. Your credit report is a record of your financial history, so the first step to improving your score is to check its accuracy.
You are entitled to a free copy of each of the three major credit bureaus reports once a year from each bureau. Checking all three reports at once will allow you to see where you stand with all three agencies and help identify any errors in the information they contain about you.
Pay outstanding bills and debt
If you want to improve your credit score, you must start paying off all of your bills on time and in full. Make sure that you pay more than the minimum payment on any debt you have each month.
You should also avoid getting new lines of credit as much as possible because it will negatively affect your credit scores if you don’t pay off your debts before applying for another line of credit or loan.
Pay Down Debt
If you have a credit card or student loan debt, the best way to improve your score is to pay down that debt. Instead, you’ll want to focus on paying off any accounts with high balances first (or all of them, if possible).
Your credit report will show how much you owe and your current payment plan. So check those numbers often and ensure they’re accurate by contacting the company that issued each account.
If you can’t pay off an entire balance, try making partial payments instead of skipping or racking up late fees.
Plan your credit
- Plan your credit.
- Determine what you want to do with your credit.
- Know how much you can afford to borrow.
- Check your credit score before applying for any new loans or credit cards to know what type of interest rates are available in the market and which lenders offer the best deals.
Consolidate your debts
The next step is to consolidate your debts into one loan. This will allow you to make all of your monthly payments in one place, which will help you keep track of what is being paid and when. It also means that if any late payments are made on the debt, they will be applied toward the total balance instead of only affecting the payment plan for that particular bill.
Consolidating your debts into one loan can also lower your interest rate, as some lenders may offer lower rates on a consolidated loan than those charged by individual creditors.
Financial experts at Lantern by SoFi say, “Generally, credit cards have more protections than debit cards, and using a credit card responsibly can help you build a good credit history.”
This is a guide to help you improve your credit score. It’s not meant to be comprehensive or exhaustive, but it should give you enough information to make a good start on improving your credit score.
