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5 tips to improve your credit score

A house. A car. Even a job.

The fact is, your credit score is used for many parts of your daily life.

When your credit is excellent, doors open to lower rates and new opportunities. But for those who have bruised or no credit, living the life you want can feel out of reach.

And repairing your credit score? That can feel like a huge undertaking.

Don’t lose hope. Understanding your credit score is an important step in financial well-being, and there are clear pathways toward improving your credit score.

Here are five.

Pay bills on time

What’s the harm in being a day or two late? It could cost you a lot more than you think. Late payments not only result in additional fees and potential rate increases, but they also ding your credit score.

Sound like you? We recommend you commit to making the minimum payment or more on your credit card bill each month.

Making payments on time accounts for approximately 35 percent of your credit score, a figure that may vary between the three credit bureaus.

Even if you’ve had some serious delinquencies in the past, a recent history (24 months) of on-time payments carries weight. It’s a positive signal to credit bureaus that you are responsibly making on-time payments.

Know your capacity

When it comes to credit cards, know your limit.

What’s the actual spending limit on each card before it’s maxed out? The amount of credit you have access to is called your available credit, and it’s another major component of your credit score.

If all of your credit cards are maxed out, you don’t have available credit. A good target for a healthy credit score is to keep 70 percent of your card balance free. This increases what is known as your capacity and reflects positively on your credit score.

Looking at a target to aim for? The ideal point for card balances is about 30 percent of the spending limit. Depending on your situation, this may take some time, but it is achievable. We recommend you roll a debt snowball to pay down that debt.

Don’t open a lot of credit at once

Good thing: Having a mix of credit cards and loans.

Bad thing: Getting a loan and three credit cards in the same month.

Especially if you are just beginning to establish credit, opening multiple accounts in a short timespan is risky. Plus, every time your credit is pulled you may see a small dip in your credit score.

While these points repair themselves over time as you make on-time payments, take a moment to consider if saving 5 percent off that new pair of jeans for an in-store credit card is worth the impact to your credit score. Only apply for credit when you’ve considered the impact.

Establish credit for the long haul

With all of the things to think about, is having credit even worth it? Absolutely. Having no credit can be considered just as risky as having bad credit.

When you have no credit, you have no credit score, which means no history for lenders to evaluate. You haven’t shown a positive or a negative spending history, and this could make you a gamble to back when you are looking for that house, car, or job we talked about earlier.

Just remember, it can take six or more payments to generate any impact on your FICO Credit Score. This is a long journey, so establish credit and manage it responsibly.

Know when to get help

You may not be able to divorce your credit score, but you can get counseling. Just don’t wait too long before talking to a professional to receive the direction and input to help redirect you toward credit bliss.

You can check your credit report annually for free through the credit bureaus. Armed with that knowledge, consult your financial institution for help. Credit unions are a great resource to begin the journey of repairing your credit relationship.

Yes, it’s going to take time and work. But living your best life is worth it. The sooner you begin the process, the sooner you will be on the path to living well.

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