The words “credit score” often come with a headache, especially when you’re trying to figure out how to improve yours. That’s why we’re laying out three of best ways to rebuild or improve your credit score and set yourself up for success.
Three Ways to Build Your Credit Score
Pay on time, all the time
This is often easier said than done, but when it comes to your credit score, the importance of paying your bills on time cannot be overstated. Your payment history is one of the largest contributing factors to your score. Having a late or missed payment can dock you a significant number of points. Luckily there are plenty of tools available to help you make payments on time.
- Set up automatic payments for rent and utility bills
- Set up alerts a few days before your loan and credit card due dates
- Add all your due dates to your calendar
- Set automatic minimum payments on loans, and pay extra as you can.
Use your credit wisely
There is such a thing as good debt. When you use your credit card and pay back your bill on time, you are creating a consistent payment history that bumps up your credit score and tells lenders you are reliable. That being said, most sources recommend keeping your credit utilization “at or below 30 percent” because “having available credit indicates that you’re only using the credit that you need, which may be a positive sign for lenders” (Equifax).
If you struggle to stay below the 30% benchmark, you can try:
- Asking your credit card company to increase your limit. An increased limit will lower your overall credit utilization and improve your score.
- Getting another credit card, but not increasing your spending. The credit pull could hurt your score short term, but having more credit available will help your utilization score.
- Using a debit card for some purchases. If you can shift a few large, regular purchases – like utilities or rent – from credit to debit, your credit utilization will decrease.
Consider credit-building shortcuts
While a lot of the “Build credit fast!” ads out there are scams, there are some things you can do to give your credit a big boost in a pretty short amount of time.
- Get a Secured Credit Card. If you don’t have a lot of credit history built up yet, secured credit cards are the perfect place to start. They help create positive credit history because they require that you make a deposit upfront that matches your credit limit. Then, you can use your card as usual, and make payments just like any other credit card. Typically, secured cards look no different than unsecured cards so you will be the only one who knows it is secured!
- Become an Authorized Signer. If you have a friend or family member with good credit, see if they’ll consider adding you as an authorized user on their credit cards. That way, their positive card use and payments help build your score. But the opposite is true, too – if they miss a payment, it will hurt your score, too.
- Check your Credit Report and Dispute Errors. In general, your credit report includes your recent history of credit behavior. But sometimes there are mistakes – old payment history that should have dropped off, errors made by lenders or medical collections, or even fraudulent activity that’s counting against your score. Download a free report from one-or all- of the credit agencies and review it, then work on having any errors removed.
While rebuilding your credit takes time, these steps will help you on your way to a higher credit score and a healthier financial future! If you are interested in how Sierra Pacific can help you improve your credit score with a loan or credit card, talk to our team today!
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Sources:
https://www.nerdwallet.com/article/finance/raise-credit-score-fast
https://www.experian.com/blogs/ask-experian/credit-education/improving-credit/improve-credit-score/
https://www.equifax.com/personal/education/credit/score/how-to-improve-credit-score/