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Your credit score determines whether you can have a credit card in your wallet and get an affordable car loan or mortgage with a reasonable interest rate. Your credit score may also determine how much you pay for some utilities like natural gas, whether you can get cell service through a major carrier, and if you would be approved for auto insurance through a reputable carrier, even if you have an excellent driving record. If you want a better score, here are six things to consider.
#1 Be careful about new credit accounts
New accounts can hurt or help. If you’re carrying debt, opening a new account will lower your utilization which can bump your score. On the flip side, your average age of accounts matters, so opening new accounts can drop this score factor. Adding new credit can give you an overall bump, but if you abuse it, it can hurt your score. Also, too many credit checks can drop your score. Be strategic about when you open new accounts and how you use them to get a better score.
#2 Stop charging
You should not live off your credit cards. While it’s no big deal to swipe plastic so long as you pay it off in full at the end of the month, if you charge things you can’t afford, it can send you into a spiral that hurts your credit score. However, you also need activity on your cards to keep your issuers happy so it’s a matter of finding balances. Try never to charge anything unless you can pay it off at the end of the month, except in cases of emergency.
#3 Pay past due balances
If you have any overdue items, get them caught up ASAP. If you’re just coming out of bankruptcy, you got a fresh start on your debt, so it’s critical that you not get back into a hole again. If you have anything late, be sure to take care of it and do everything you can not to fall behind on your bills and debt payments. It’s particularly important to stay current on those that report to your credit report monthly, but almost any bill left unpaid can eventually lower your score.
#4 Make your payments on time
A good credit score is the result of a long-term pattern of responsible behavior with credit. So, it’s very key that you not default on payments. Consistent monthly payment is perhaps the biggest factor in getting and maintaining a good credit score. If you are not consistent in your monthly payments, your score could take a big hit. Set up a budget, set calendar reminders, and do everything to get and stay on track with all your payments.
#5 Don’t close any accounts
If you’re doing some financial housecleaning, you might consider closing some accounts that are older, or you don’t use often. First, consider whether closing them might lower your credit score. Accounts contribute in two vital ways. Having older accounts can boost your score because it increases your average age of credit. Also, if you ever carry balances, your total credit lines are consequential because you want a low utilization (total debt/total credit lines). Closing accounts will lower your credit lines and your score.
#6 Pay down your debt
If you carry debt on your credit cards, you must watch the percentage of debt you use. If you carry more than 20-30% utilization (i.e., debt/credit lines), you could be lowering your credit score. Reducing your debt also reduces your credit utilization ratio which should boost your score. The best-case scenario is to pay off your credit cards in full each month so that you never pay interest or run the risk of going over your limits.
If you’re coming out of bankruptcy and want to improve your credit score, it’s time to take action. Check out Credit Score Keys now to find out more about how to strategically improve your credit and get the most from your fresh start after bankruptcy.credi