New Year , New Credit Score
Samantha Rhodes
We all try to avoid the dreaded credit score conversation . Having a low credit score can cost us thousands of dollars over the course of our “ adulting ” life . If you have a less than ideal credit score , you are not alone . A study has shown that nearly onethird of Americans have a credit score below 601 . Repairing bad credit is like losing weight ; it takes time and there is no quick fix . The best advice for rebuilding your credit score is to manage it responsibly over time . Fortunately , there is hope ! These scores are not set in stone and with some work you can change it . First let ’ s determine what is good and bad credit :
Excellent Credit : 750 + Good Credit : 700-749 Fair Credit : 650-699 Poor Credit : 600-649 Bad Credit : below 600
Now as we know , anything above 750 is truly just bragging rights . The real goal is to be in the
700-750 range . With all the scores listed above , the higher the number the lower the risk . That means consumers with higher scores are more likely to get approved for credit , and to get the best interest rates when they do . Here are 5 tips to help you improve your credit score .
1 . Check Your Credit Report – Credit score repair begins with your credit report . If you haven ' t already , request a free report and check it for errors . You can even use sites / apps such as Credit Karma ( my favorite ). Your credit report contains the data used to calculate your credit score and it may contain errors . The most common mistakes can be late payment history . Check for incorrect late payments on your accounts and balances owed . If you find errors on any of your reports , dispute them with the credit bureau .
2 . Setup Payment Reminders or Auto Pay – Making your credit payments on time is one of the biggest contributing factors to your credit scores . Some banks offer payment reminders through their online banking that can send you an email or text message reminding you when a payment is due . You could also consider enrolling in automatic payments through your credit card and loan providers to have payments automatically debited from your bank account .
3 . Reduce the Amount of Debt You Owe – Easier said than done right ? Reducing the amount you owe is going to be a far more satisfying achievement than improving your credit score . The first thing you need to do is stop using your credit cards . Use your credit report to make a list of all accounts with their corresponding interest rates and then go online or check recent statements to determine how much you owe on each account . Come up with a payment plan that puts most of your available budget for debt payments towards the highest interest cards first , while maintaining minimum payments on your other accounts .
4 . Length of Credit History - Age of credit history reflects the length of your experience with the credit system . This aspect of your credit score is meant to speak to how experienced you are with the responsibility that comes with credit cards , loans , and other borrowing . Lenders typically like to see that you ' ve used a variety of accounts responsibly . If you have been managing credit for a short time , do not open a lot of new accounts too quickly . New accounts will lower your average account age . This will have a larger effect on your scores when you lack a long history of other credit information . Also , rapid account buildup can look risky if you are a new credit user . The longer the time of credit history the better the average ... it can be that simple .
5 . Do Not Close Unused Credit Cards - You are actually better off keeping a low balance on these accounts and paying regular minimum payments than you are to close them . Closing accounts can shorten the length of your history , in-turn lowering your credit score . Crazy I know , it seems counter- intuitive . Another option is to make paying down small balances a priority while paying the minimum on cards with bigger balances . Start with the smallest balance by paying as much as you can toward it each month until it is paid off . Then , move to the card with the next highest balance and keep repeating the pattern . * Side Tip : Consider paying down your credit card debt with a personal loan . A loan could add to your credit mix and potentially help you save on interest .
With all these things in mind , remember most importantly to focus on keeping your current accounts in good standing . If you do not need more credit , it is often not worth the risk of creating additional debt by opening more accounts . With these tips you can be on your way to having an above average or better credit score . Who knows , maybe one day you will have the amazing bragging rights to a 750 + credit score . After all it is 2017 ... anything is possible !
FEBRUARY 2017 | WINTER GARDEN MAGAZINE | 41