8 Ways to Improve Your Credit
Number 1 is don’t abuse your credit cards. Sounds very simple, but a lot of people, don’t really know how to properly use their credit cards. Whenever you purchase something on your credit card pay it off in full. Don’t just pay the minimum balance. Make sure that every time you get a monthly statement you are paying off the full amount that you owe.
Number 2 is to be responsible with your debt. So that just means you most likely have more than just a credit card. You might have a line of credit or a mortgage, student loans, car loans, etc. Make sure that you never pay less than the full amount. Because if you don’t do that it could negatively impact your credit score.
Number 3 is to pay your bills. Your bill payments factor into your credit history. So make sure whatever bills you have, your phone bill, your utilities, your rent, you are paying the full amount every single time.
Number 4 is don’t max out your credit cards. I know you may have never even thought about this, but just because you have a $5,000 limit on your credit card doesn’t mean that you should spend $5,000 then pay it off. Actually, what you’re suppose to be doing is spending between 20% to 30% of that credit limit. If you spend more than that it will signal to the lender and the credit bureaus that you’re overextended, which can negatively impact your credit scores. So if you have one credit card, and you keep spending 80% of that limit, you can request for an increase of your limit. So you are always just spending between 20% to 30% of your credit card limit.
Number 5, don’t cancel your oldest credit card. The oldest credit card has the longest credit history associated with you. Especially if you’ve been good with that card, and have always made all of your payments on time. It will be a good reflection of how you deal with credit. If you cancel that credit card, then your credit history will no longer be involved when the credit bureaus are looking at all those different elements to determine what your credit score should be.
Number 6 is do not open too many credit card accounts. It can negatively effect your credit score, because it may signal to lenders that you are overextending yourself. Typical rule of thumb is to have 1 to 3 credit cards. Also don’t open up too many in a short amount of time, it will lower your credit score.
Number 7 is to check your credit reports. Now this is something you should be doing at least once annually with both Equifax and Transunion. So make sure you put it on your calendar as a yearly reminder. Now when you’re looking at your credit reports, you want to search for any mistakes or fraudulent activity. If you see any mistakes or fraud call the bureaus and say “Hey, there’s errors on my credit report, can you correct them?
Number 8 is to check your credit scores. You can check your credit on Credit Karma ‘s website (creditkarma.com). Really what your credit scores mean is not how good you are with your money, or how much your net worth is. It’s just a score that shows lenders or creditors how credit-worthy you are. If you have a high credit score lenders will be open to giving you a big loan with a great interest rate, rather than someone with a low credit score. So credit scores are just showing you how responsible you have been in the past.
