Your credit score is like a grown-up version of a report card. It shows how liable you are to pay off debt on time and in full and how likely you are to default.
But everyone makes mistakes and it’s common for your credit score to drop while you’re still learning about how to be responsible with your money. Like a low GPA, you can raise your credit score fairly easily.
Read below to find out how to boost your credit score and how to keep it high.
Pay Your Bills on Time
The biggest element in your credit score is if you pay your bills on time every month. That makes up a huge portion of your credit score. When you make a late payment, the company notifies the credit bureaus that produce your credit scores.
Figure out why you struggle with late payments. Is it because you often don’t have enough money to pay your bills? Or do you simply forget to pay your credit card bill?
Set up automatic payments from your bank account for all your bills. You can pay just the minimum if you can’t afford to pay the entire statement at once.
You can also create recurring calendar reminders in your phone, calendar or planner. If you prefer getting physical reminders of your bills, sign up for paper statements to be sent to your home.
As soon as you notice a late payment, call the company and make a payment right then. Usually, a payment needs to be more than 30 days late for it to show up on your credit report.
Lower Your Credit Use
A credit score tells prospective and current lenders how responsible you are. One of the factors that determine your creditworthiness is how much credit you’re currently using or your credit utilization. This makes up 30% of your credit score, so it’s an important component. This mostly affects credit cards and lines of credit.
You can find your credit utilization ratio or percentage by dividing your current credit balance by the available credit limit. Look up your credit card bill and view the most recent balance and then find the total credit limit.
If your balance was $3,000 and your credit limit is $10,000, then your utilization percentage is 30%. That means you should pay off more of your balance or call the credit card provider to increase the limit.
It’s not uncommon for your score to be low because of a mistake or error on your credit report. That might be because your identity was stolen, and someone opened a credit card in your name. It might also be because you didn’t get a bill in the mail and the lender sent the bill to collections.
Look at your credit report to see if there are any mistakes and call the lender to ask about any collections or defaults. If you find an error, try to fix it as quickly as possible.
Avoid Opening New Accounts
Too many new accounts will affect the average age of your credit accounts. If possible, don’t open any new accounts unless you absolutely need it. If you have a lot of new accounts, a lender might think you don’t have enough cash on hand.
If you’re still having trouble increasing your score, check out Climb’s Personalized Credit Prescription that will give you custom, specific advice on how to increase your credit score.
About the Author
Zina Kumok is a trained journalist and has covered everything from professional sports to murder trials. Now, she specializes in personal finance and has written for brands and publications such as Mint, Investopedia and Discover. She paid off $28,000 worth of student loans in three years.