It is no mystery (or at least it shouldn’t be) that just about everything you do in the financial world revolves around your credit score. And, of course, your credit score revolves around what’s on your credit report. Your credit score affects your life.
If you have poor or downright bad credit, you know it. So, here are 10 changes you can make today to improve your credit over time.
1. Become an Authorized User
If your spouse or parent has good to great credit, there’s a quick and easy way to boost your credit score. Have them add you as an authorized user on one more of their credit cards.
When you’re added as an authorized user you can piggyback on the good credit that your spouse or parent has. Their good to great credit score positively affects your credit score.
2. Clean Up Your Credit Report
By law, you’re entitled to one free credit report from each of the three credit bureaus each year. Usually, you can access and download them online, so order your free credit reports now and start scouring them line by line.
You want to check for anything that is incorrect on the report. Contact the creditor and credit bureau to report and correct the error(s).
3. Pay Your Bills
One of the biggest portions of the credit score calculation is paying your bills. Always, always, always make sure that you are paying your bills. If, for some reason, you’ve gotten into a bad habit of not paying your bills, STOP it and start by paying any and all of your bills that are due today.
4. Pay Off Credit Cards
Pay off or pay down your credit card balances. The amount of your credit card balances compared to the total credit line you have is called the utilization ratio. If you have some or all of your credit cards maxed out then pay off or pay down your balances to bring down the utilization ratio to help improve your credit score.
5. Leave Old Debt Alone
The longer your relationship with your creditors, the better it is for your credit score. Basically, leave your old debt alone. Don’t go out and start closing all of your old credit accounts (even if you don’t have balances or use the credit anymore).
Instead, leave it be. It actually helps your credit score to keep these long-lasting relationships in place.
6. Set Up Payment Alerts
Paying your bills is your number one priority. Paying your bills on time is your second priority (if not right up there in first position with paying your bills). Do whatever you have to do to make sure that you pay your bills on time.
Set up payment alerts as part of your online bill pay through your bank. Set an alert in your phone. Slide your paper bill in your paper calendar in or around the due date to remind yourself when to pay your bill.
7. Make a Plan
If your credit stinks and you’ve studied your credit report, you know what the blemishes are and what you need to fix. Create a plan so you can tackle the blemishes on your credit one at a time so you can turn those negative marks into positive ones and increase your credit score.
Once you make a plan, stick to it. It’s the only way you can fix your credit and improve your credit score.
8. Apply for New Credit
If you need new credit, apply for a new type of credit—one you don’t already have. Variety is the spice of life and it’s the spice of the credit world, too. If you have a variety of types of credit, it can improve your credit score. Just having a boatload of credit cards is not credit variety and can hurt your credit score rather than help it.
Having a mortgage, car loan, a few credit cards, and a student loan, however, can be just the right mix.
9. Increase Your Credit Limit
Contact one of your creditors to request an increase in your credit limit. This goes back to the utilization ratio. An increase in a credit balance decreases your utilization ratio, which then can help to increase your credit score.
10. Pay Twice a Month
Bills are due once a month so you usually pay your bills once a month. Creditors also only report to the credit bureaus about once a month. This means that even if you pay off your credit balances each month, if you run up huge balances each month, it can look to the credit bureaus like you have high balances and a high utilization ratio.
If you make your payments twice a month, however, it can help.
11. Let it Ride
When you open credit, let it ride. Avoid creating credit accounts just to create credit accounts, but when you do open new accounts, open them and keep them open for the long haul. Remember, the age of your credit accounts can help to increase your credit score.
12. Limit Your Credit Applications
While opening new types of credit accounts can definitely help increase your credit score, opening too many new credit accounts can also hurt your score.
13. Mark Your Calendar
If you’re applying for a new type of credit (such as buying a car or setting up insurance) limit the timeframe you apply. If you apply for the same type of credit account within a two-week period, for example, then each credit inquiry doesn’t ding your credit score. So try to limit your applications to a set period of time (that is not for the long haul).
You don’t have to live with poor or bad credit. You don’t just have to sit back and take it. There are steps you can take, starting today, to help improve your credit score.