Any time you apply for credit, like to buy a car or a home, one thing lenders will do is pull your credit history and review your credit score. If you have a marginal or low score, it could result in either being turned down or a much higher interest rate. Before you apply for car loans or other types of credit, it can be to your benefit to boost your credit score.
Tip #1: Review Your Credit Reports
You can obtain free copies of your credit reports annually. You can also get the report for free if you were denied credit. You want to look through the report and look for errors and inaccuracies. If you find anything that is wrong, dispute it so it can be removed and/or corrected.
Tip #2: Pay Down Revolving Balances
You should try to keep your revolving balances at or below 30% of the credit limits. For instance, on a credit card with a $3,000 limit, you would not want a balance over $900. The more available credit you have on revolving accounts, the better it is for your credit score.
Tip #3: Request a Credit Limit Increase
You can request a credit limit increase on revolving accounts to help you get your balances closer to the 30%. However, it is important to not use the new increases and charge up your cards.
Tip #4: Do Not Cancel Revolving Accounts
If you cancel a credit card because it is paid off, it will actually hurt your credit score. A better option would be to use the card to pay a recurring bill, like your electric bill, and then just pay the balance off each month to avoid interest.
Tip #5: Pay More Than the Minimum Due
Paying more than the minimum due not only helps reduce your balances faster but could also help increase your credit score. At the very least, pay the total interest owed for the billing cycle plus the minimum amount due.
Tip #6: Make Payments on Time
Paying your bills on time looks good to creditors and helps your credit score. Remember, you can contact your creditors and request a due date that works best for you. This way, you can space out when bills are due so they are always paid on time.
Tip #7: Buy a Home
When you have a mortgage, it can help increase your credit score because home loans are considered “good” debts to have. Plus, they will help build a long-term credit history. However, you do need to make sure you pay your mortgage payments on time.
Keep in mind, any changes, like fixing errors or paying down your revolving balances, can take a few months before you notice an increase in your credit score.
For more tips on how to boost your credit score or to learn about personal loans, mortgages, auto loans, credit cards, or other lines of credit, please feel free to stop by your nearest The People’s Federal Credit Union branch today or call us at 806-359-8571.