Your credit score is the “vital sign” of your financial health. Like blood pressure, cholesterol levels and heart rate metrics, scores point to your monetary state of wellness. If something is out of whack, scores will go down. When all is well, they’re high. How can the average working adult improve? There are multiple approaches but all have a few things in common.
A higher credit score can boost your chances of getting a low-interest home or car loan. Instead of leveraging a live insurance policy to obtain a viatical settlement, for example, you might be able to borrow directly from a bank to satisfy current cash needs. Or, instead of having to borrow against your home’s equity, you can use the power of a high credit score to finance a major vacation. The following methods work for most everyone who suffers from a poor or lackluster score.
Be a Punctual Bill Payer
Bankers, credit counselors and financial planners agree: the single best way to improve or maintain your score is by paying bills in a timely fashion. Even if you’d had trouble in the past, working hard to meet each payment obligation will help your score rise as time passes. That’s because missed and late payments are more damaging the more recently, they occurred.
It’s easy to set up a spreadsheet on the computer, complete with due dates, amounts and alerts. You can even arrange to have warnings sent to your smartphone or other mobile device to let you know when a payment is due. Lots of consumers miss payments not because they’re short of funds but because they simply fail to use an accounting system that lists everything out in chronological order. Planning and organization will go a long way toward helping you bolster credit scores.
Keep Use Under 30 Percent of Maximum
One of the quickest ways to improve credit metrics is to reduce the amount you use. If your card maximums are $2,000, for example, try to pay each one down to less than $600, or 30 percent of the total allowed. Bureaus, banks and institutional lenders pay attention to this percentage. For better or worse, they consider use above the 30 percent mark as excessive, so be sure to get your amounts in order. The sooner you do so, the better, because it takes about three months, on average for a score to rise after you put your card percentages below the 30 percent level.
Monitor Your Scores Regularly
Everyone makes mistakes, even credit reporting agencies! That’s why it pays to monitor your report at least once per year. By law, you can get reports from the major bureaus annually. Or, if you want to keep a closer eye on things, pay for quarterly reports from a legitimate company that offers the service. You’ll likely be surprised at the amount of wrong information that can slip into your report: account data from other people’s reports, incorrect amounts, old data that should have been removed, and more.
If you find something you think is incorrect, contact the reporting agency at their toll-free phone number immediately. Also send an email to their contact address and include details as to why the information is incorrect. It can take up to several weeks to correct errors but if you stay on the case, it’ll get done.