Credit scores are used to determine interest rates on mortgages, auto loans, and even how much you pay for insurance premiums. For this reason, it’s a good idea to look at ways to improve yours. Here are some ideas:
Look for errors on your credit report. The starting point is a review of your credit reports. You have the right to get a free copy of your credit report every 12 months from each credit reporting company: Equifax, Experian and TransUnion. So get a copy of your report and review it for accuracy. Follow up aggressively to correct any errors using the process outlined by each credit reporting company.
Pay your bills on time. The easiest way to improve your credit is to have a series of on-time payments for all bills reported to credit agencies. This is the most important part of your credit score equation. So, when reviewing your credit report, pay close attention to who is reporting your payments and note if any are delayed. Then gather all your monthly bills, identify due dates, and take advantage of automated tools to ensure payments are always made on time.
Get credit card usage as low as possible. The amount of credit you use at any given time is called your credit utilization and is the second most important factor in your credit score after paying on time. For example, if your credit card limit is $5,000 and your balance is $3,000, your credit utilization is 60%. Try to reduce this percentage to no more than 20%. You can achieve this by spending less, paying off as much of your balance as possible, or increasing your credit limits.
Sign up for score improvement programs. A new way to help improve your credit is to include information on your credit report that normally goes unreported. Programs like Experian Boost and UltraFICO help you add bills like rent, utility, and cellphone payments to your credit report, and analyze how you use your checking, savings, or cash accounts. Money Market. Be aware that these programs may request access to your bank accounts and could easily work against you if reporting negatively impacts your credit in the event of a billing issue.
Avoid new credit applications. Trying to open a new credit or loan account could lower your score by up to 10 points. The more inquiries from creditors trying to assess your creditworthiness when trying to open a new account, the more impact it has on your credit score. If you notice that a number of suppliers are making inquiries, you can always opt out of this feature with the credit agencies. Remember to turn it back on if you’re actively refinancing your mortgage or looking for other credit.
While in the long term your score can be maximized by having a diverse mix of different types of credit accounts, in the short term adding new accounts will negatively affect your score.
How quickly you can raise your credit score obviously depends on your personal circumstances, but following these tips will get you to a higher credit score sooner rather than later.
James Angell is a Certified Public Accountant based in Willits. His office is located at 461 S. Main St. and he can be reached at 459-4205.