6 Actionable Ways to Improve Your Credit Score
Thursday, April 30, 2020, 6:00 PM | Leave Comment
Many people don’t think about how their spending habits could be affecting their credit score until it’s too late.
At the point they notice that their score is below average, they can’t get a loan to buy a house, a car, or even open a new credit card account.
Credit scores are determined by a number of factors including the age of your account, your payment history, amounts owed, and more.
Get a handle on how to manage these factors and change your financial habits when you check out these six actionable ways you can improve your score.
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Pay On-Time
On-time payments are a critical part of your credit score — it’s the biggest factor affecting it! The more payments you make on time, the more reliable you look. As you start rebuilding your credit score, make on-time payments your priority. Even if you can only pay the minimum amount, it’s still better to pay something than nothing at all.
Since late payments or unpaid accounts stay on your report for up to seven years, having a significant number of debts can make rebuilding your credit more complicated. If you have to choose between paying an open account and a bill collector, pay the open account first. You want to avoid any other accounts going to collections and adding another black mark to your record.
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Spend Within Your Limits
Some people take a credit card as a license to spend as much as they want without consequence, but the truth is those bills do need to get paid. Change your spending habits to reflect what you actually have in your bank account — not what your credit limit allows. Keep a budget to monitor incoming and outgoing funds to ensure you’re spending within your limits and keeping your bills in check.
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Get A Secured Credit Card
A secured credit card requires a refundable deposit from you to work. It acts like a debit card, but the information about the account can be shared with major credit bureaus like Experian or TransUnion. While your bank does not share any information related to a debit card, a secured credit card through a third party can help you build or rectify your credit history.
The only major drawbacks of a secured credit card are that they could come with an annual fee and higher interest than a regular credit card. Research your options before making a final choice and don’t allow any late payments, so that you can avoid racking up interest charges and late fees.
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Protect Your Identity
In the age of the internet, identity theft and scams are much more common than you think. Protecting your identity when making any financial decisions is critical. Whether you’re applying for a loan, opening a new account, or scanning your card at the gas station, the security and safety of your information is critical. Once someone gets their hands on your identity or credit card numbers, they can use them indiscriminately while your credit score and financial integrity suffer the consequences.
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Become an Authorized User
An authorized user is someone who is added on an existing account that belongs to someone else. You can ask a close friend or family member with good credit to add you as an authorized user on their own credit cards. You should see an immediate modest bump in your credit score.
Since you want to make sure they feel completely comfortable having you on their account, make sure they know that they can set a spending limit on your card or forego giving you a card at all! As long as your name appears next to theirs, you don’t actually need to make any transactions or have a physical card. Just make sure you choose to link your name to someone in good standing, as any late payments or black marks on their record can now affect your score too.
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Build The Age Of Your Accounts
Many people don’t know that the age of your account is actually the average of all your open credit cards and loans. You might have opened your first account 20 years ago, but if you have a new card that you just got yesterday, the age of your account is actually only 10 years old. Make it your mission to minimize opening new accounts until your credit card history has aged a bit more. In this case, doing nothing means a lot!
You don’t want bad credit affecting your financial future. Take the right steps towards a healthy credit score and better spending habits when you follow these tips.
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Katie Tejada is a writer, editor, and former HR professional. She enjoys writing about personal finance and stock market trends, but also covers developments in HR, business communication, recruiting, and CRM solutions.
