Is your credit score preventing you from living the life you want?
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A house. A car. Even a job. The fact is, your credit score is used is for many parts of your daily life. For those who have bruised or no credit, repairing it can feel like a huge undertaking. We’ve all been there – missing a payment because life got too hectic or spoiling yourself with some retail therapy, but there is hope. Given time and a plan there are some common ways to help improve your credit score.
Pay bills on time
What’s the harm in being a day or two late? Well, 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. Even if you’ve had some serious delinquencies in the past, a recent history (24 months) of on time payments carries some positive weight. Making payments on time accounts for approximately 35 percent of your credit score, however this may vary between the three credit bureaus.
When times are tight, make at least the minimum payment on your credit card bills. Even though it’s the minimum, this is 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. Your actual spending limit. It’s a good idea to keep 70 percent of your card balance free versus maxing it out. This helps increase what is known as your capacity and reflects positively on your credit score. The ideal point for card balances is about 30 percent of the spending limit, but that is a long-term goal and it may take some time to get there.
Don’t open a lot of credit at once
Having a mix of credit cards and loans is actually a good thing. Getting a loan and three credit cards in the same month is not. Especially if you are just beginning to establish credit, opening multiple accounts can be risky. Not to mention, every time your credit is pulled you may have a small dip in your credit score. These points repair themselves over time and is far outweighed by the positive points accrued by making payments on time. 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 in your credit score. You only want to apply for credit when you’ve considered the impact.
Use credit but manage it responsibly
Having no credit can be considered just as risky as having bad credit. No credit means no credit score. You haven’t shown a positive or a negative spending history, and for many lenders this unknown makes you a gamble to back. It can take six or more payments to generate any impact on your FICO Credit Score, so remember this is a long journey.
Know when to get help
You can’t divorce your credit score. Sometimes it needs outside support and counseling and not waiting until too long before talking to a professional is important. By working with your financial institution, you can begin the journey to repair your credit relationship.
You can check your credit report annually for free through the credit bureaus. It’s going to take time and work but the sooner you begin the process, the sooner you will be on the path to living well.