Now, more than ever, one’s credit score has a huge impact on what they can “afford”. Credit scores play a major role in determining your worthiness for mortgages, auto loans and credit cards. They can even affect your ability to get a job. Many of us, especially in these times, have a few, if not many, negative remarks on our credit reports. Because of that, I am going to give a few tips on how to build or rebuild your credit.
Pay your bills, in full.
I know this is easier to say than do, but it is important. If you can, it is best to pay off your full bill every month. This s good for two reasons; One, when you pay your bill in full every month, you don’t pay any interest and two, it shows that you are well within your spending ability, given your income and credit.
Keep your balances low.
It is best to keep your balances under 30% of your limit. It is better to spread your debt over a few cards than to have one card with a high balance and two cards with no balances.
Pay your bill on time.
This is one of the most important ways to keep your credit in good standing. Creditors do not want to see late payments. This can reduce a good credit score; say 720, by as much as 100 points, depending on the circumstance. We all hit hard time and it can be tough to pay all one’s bills on time, but if you know you are not going to be able to make you payment, call your creditor. There is a good chance they will move back the deadline, but remember, do it early. The sooner you let them know, the more likely they are of giving you an extension.
Don’t apply for a lot of credit.
This is something that a lot of people don’t know, but when you apply for a new credit card or loan, it shows up in your report. Creditors do not like to see a lot of inquires within a short period of time because it is a sign that you are in serious need of money, which is a red flag for risk.
Keep your old cards.
When it come to your score, credit history is very important. The longer you have been using credit, the better; so don’t close your old accounts. It is much better to keep them open and to use them. Each is beneficial for its own reasons. Keeping old accounts open benefits in both credit history and overall available credit. Using those old cards will help spread your debt.
Ask your creditors to increase your limit.
This can be very beneficial because it will spread the gap between your balances and your limits. I recommend asking for an increase every 2 to 3 months. One of the pros of doing this, other than the obvious, is when your current creditors pull your report for an increase; they do a “soft pull”. A “soft pull” is similar to when one checks their credit report and it does not have a negative effect. This is not true of a “hard pull”, which is when you apply for new credit, such as a loan or new credit card. “Hard pulls” show up in your report and, like I stated above, creditors do not like to see a lot of inquires.
Review your report.
The best way to keep your score up is to review your report often. Mistakes happen in credit reports and they can have a huge impact on your score. You can get a free report once a year from annualcreditreport.com and there are many services that will send you a monthly report. Remember, your own inquires will never affect your score, so check it as often as you want. If you are new to credit, I recommend checking your report once a month. This will aid in your understanding of the report, its self, and ensure that you won’t be stuck with any surprises.
Feel free to leave a comment or a question below.
I hope this helps. We are all going through tough times, but remember, good things come to those who make it happen.