A credit score is a financial rating that measures the health of your credit and determines whether you can qualify for things like credit cards and loans. Without a good credit score, generally considered 670 or higher, with a maximum score of 850, it’s harder to finance a new car or rent an apartment.
Your credit score is based on information in your credit report and calculated by considering factors such as the amount of money you borrowed, whether you were able to repay installments on time, and how often you which you missed a payment.
You might think you don’t need to have an open line of credit if you live within your means, but it’s not just about having extra spending money. Unless you’re a Rockefeller or a Vanderbilt, you’ll need to pass a credit check to show creditors you’re responsible and to give you a solid financial foundation on which to grow.
But what if you don’t have a good credit rating? Below are some of the best ways to boost it.
The best thing you can do to start boosting your credit score today is to make all your monthly payments on time, every time – it’s one of the top habits of financially successful people. To keep track of them all, create a payment schedule, set payment reminders on your phone, or set your payments to automatic payment. Use whatever method feels natural to you, because on-time payments are one of the most important ways to control your credit.
Credit usage is the amount of your available credit that you actually use. The lower your credit usage, the better your credit score. Experts say to use 30% or less of your available credit at all times, but people with the highest scores have less than 10% credit use. For example, if you have a credit limit of $1,000, try spending $300 or less each billing cycle (and if you really want to rock it, $100 or less).
To keep your credit in the black, charge small amounts to your credit card and make payments on large purchases before your bill is due.
Although there is no perfect number of lines of credit to open, most Americans have three or four credit cards at any given time. But using this trick to boost your credit score is less about how many lines of credit you have and more about how you manage them.
Start with one, then when you’re comfortable keeping your credit usage low and making your monthly payments on time, see if opening another line of credit can improve your score.
Every time someone handles your credit, there will be an inquiry into your credit score.
There are two types of surveys. A “soft” request shouldn’t affect your credit score, but a “hard” request can temporarily lower your credit score, and too many hard requests can really affect it. Plan to apply for loans, credit cards, or another line of credit only when you’re sure you’re ready to make a purchase. Otherwise, your credit score may drop during the purchase process, limiting your purchasing options.
Your credit score is basically a numerical value of your ability to stick to a budget. It may go without saying, but to increase your credit score, you need to stick to a budget and live within your means. It helps you become more financially responsible and aware of your spending habits.
An easy way to stay on track? Review all the subscriptions, streaming services, and automatic payments you signed up for and get rid of any you no longer use. You can also look at the number of times you order takeout, buy things online, or take Ubers each month, and choose to reduce unnecessary purchases.