Rebuilding your credit score takes time and commitment, but it’s an important goal to work towards. A good credit score is important for obtaining loans, qualifying for lower interest rates and getting a job, and it can have a dramatic impact on your quality of life. For instance, your credit history determines what loans you will qualify for and the interest rate you will pay. What’s more, according to a survey conducted by the Society for Human Resource Management, 47% of employers check potential employees’ credit reports as part of the hiring process.
If your credit score is suffering, don’t wait to fix it. Follow these steps to begin boosting your credit score now.
1. Track your funds regularly.
One of the most important steps toward building good credit is adopting healthy money management and establishing a budget that prevents you from living outside of your means. While a credit card can help you build your credit, it’s important that you don’t abuse it and begin charging purchases, vacations and other elaborate goods that you can’t afford. If you treat your credit card as if it were a debit card and only charged those expenses you can actually cover at that moment based on how much money is in your checking account, you will learn better buying habits and avoid going into debt. Use your bank’s mobile app to track your funds and check your balance whenever you’re tempted to buy something you didn’t plan to.
2. Don’t be late.
From credit cards to bills to auto loans, making payments on time plays a part in boosting your credit score. To stay on track, automate payments or set reminders and alerts a few days before the bill is due. Setting up automatic payments for your monthly bills is a great way to stay on top of expenses while earning rewards. Some utility bills may charge a minimal credit card fee to process, but you may find the benefits outweigh the costs. While automating your payments and going paperless can help you stay on top of bills and manage finances smoothly, it’s a quick way to overlook extra charges or mistakes in billing. Make sure to continue reviewing your monthly bills and look out for errors or rate increases.
4. Maintain a low balance.
Maintaining a low balance on your credit cards and other credit accounts will not only help you manage timely payments, but it also helps boost your credit score. “Credit card utilization rate” refers to the amount of money you charge on a monthly basis and is used to determine your creditworthiness. Those who keep their utilization percentage low typically have higher scores than those who max out their credit cards constantly. You should never use more than 30% of your available credit. Once you go beyond this percentage, your credit score will be negatively impacted. Don’t close old accounts either, as the length of your credit history plays a part in your score, too.
5. Carry fewer cards.
The more available credit you have to use, the more likely you are to use it and this could put you into a bad position. Limiting the number of cards you have and carry around with you at any given time is a habit that will keep you from overspending. Plus, it’s harder to manage multiple credit accounts as you’re more likely to miss payments and get slapped with late fees and interest fees.