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8 Tips to Improve Your Credit Score
A strong credit score is essential for financial success, helping you secure better loan rates, qualify for premium credit cards, and even improve your chances of renting an apartment. A higher score can lead to more financial freedom, so investing the time and effort to improve it will benefit you for years to come. If you’re looking to improve your credit score this year, follow these eight practical steps to build and maintain healthy credit.
1. Check Your Credit Report Regularly
Your credit report provides insight into your financial history and helps you identify areas for improvement. You can obtain a free copy of your credit report annually from AnnualCreditReport.com, the only federally authorized source for free credit reports. Many people are unaware of mistakes on their credit reports, such as incorrect account information or fraudulent activity. Disputing inaccuracies can prevent these mistakes from negatively impacting your credit score.
Regularly checking your credit report helps ensure that all the information listed is correct. Additionally, it can also alert you to any unauthorized activity. If you find a mistake or spot fraudulent accounts, dispute them immediately. The sooner you catch such errors, the less likely they are to affect your credit score.
2. Pay Your Bills on Time
Payment history is the most significant factor affecting your credit score, accounting for 35% of your FICO score. This means that one missed payment can cause a significant drop in your score and can stay on your record for years. Even if you’re facing financial challenges, staying current on payments is essential.
To help ensure you never miss a payment due date, consider setting up automatic payments for bills like utilities, credit cards, and loans. If automatic payments aren’t possible, make it a habit to schedule reminders or mark payment due dates on your calendar. Consistency is key. Setting up alerts on your phone or using budgeting apps can also help you remember when payments are due, minimizing the chances of late payments.
3. Reduce Credit Card Balances
Your credit utilization ratio—the percentage of your credit limit that you’re using—plays a big role in your credit score. This ratio should ideally be below 30%, meaning you should be using no more than 30% of your available credit. The lower the utilization, the better it is for your score.
Carrying high credit card balances not only increases your utilization ratio but can also signal to lenders that you’re overextending yourself financially. To lower your credit utilization, consider paying down balances on existing cards. You can also increase your credit limits, which will reduce your ratio, but be cautious with this strategy as it requires responsible use. Spreading purchases across multiple cards can also help maintain a lower utilization rate on each card, improving your overall credit score.
Another strategy to improve your utilization is to make multiple payments throughout the month instead of waiting until the due date. This reduces your average balance and, therefore, your utilization ratio.
4. Avoid Opening Too Many New Accounts in a Short Period of Time
Each time you apply for a new credit card or loan, a hard inquiry is recorded on your credit report. Too many hard inquiries in a short period of time can lower your score, as it may indicate to lenders that you’re taking on more debt than you can manage. Hard inquiries typically stay on your credit report for about two years, but they can impact your score for a shorter period.
Instead of frequently applying for new credit, focus on responsibly managing your existing credit accounts. It’s tempting to apply for new cards to increase available credit, but responsible credit management over time is what will make the biggest impact. If you do need to apply for new credit, try to space out your applications to avoid multiple inquiries in a short period.
5. Keep Old Credit Accounts Open to Maintain Your Credit History
The average age of your credit accounts contributes to your credit score. The longer your credit history, the more reliable you appear to lenders. Even if you no longer use a particular credit card, keeping it open can positively impact your credit history. Closing an old account reduces your average credit age and may increase your credit utilization, both of which can hurt your credit score.
Keeping older accounts active with occasional small purchases can help maintain your credit history without incurring large fees or interest charges. Just be sure to pay off the balance in full each month to avoid accruing debt.
6. Diversify Your Credit Mix
Lenders like to see that you can handle various types of credit responsibly. This includes credit cards, auto loans, mortgages, and personal loans. Having a diverse credit mix shows that you’re capable of managing different types of debt. If all your credit accounts are credit cards, for example, it might signal to lenders that you’re not experienced with other types of credit.
Consider diversifying your credit mix over time. If you’re only using credit cards, you might want to consider taking out a small personal loan or adding an installment loan to your mix. That said, be cautious about applying for new loans or credit cards you don’t need just for the sake of diversifying. It’s important to only take on debt that you can manage.
A well-balanced credit mix can help improve your credit score over time and demonstrate to lenders that you can handle your finances responsibly. However, be sure to avoid unnecessary debt.
7. Use a Secured Credit Card or Become an Authorized User
If you’re working on building or rebuilding credit, a secured credit card can be a great tool. These cards require a refundable security deposit, which acts as your credit limit. Responsible use of a secured credit card—paying your balance on time and in full each month—can help you establish a positive credit history and improve your score.
Another option is becoming an authorized user on a trusted family member’s credit card. If they have a good payment history, their positive credit usage can help boost your credit score. However, keep in mind that this strategy works best when the primary cardholder maintains a solid payment record and low credit utilization.
A secured card or authorized user status can be particularly helpful if you have little to no credit history. Over time, as you build a positive payment history, you may be able to upgrade to an unsecured credit card, which offers more flexibility and higher credit limits.
8. Monitor Your Credit to Stay on Track
Credit monitoring services can alert you to changes in your credit reports, helping you detect fraudulent activity or score fluctuations. Many banks and credit card issuers offer free credit monitoring tools. Take advantage of these resources to track your progress and maintain healthy financial habits. These services can help you stay on top of your credit situation, ensuring you’re aware of any issues as soon as they arise.
Some services provide detailed reports and scores, offering insights into what’s affecting your credit. Use this information to adjust your financial habits as needed. Regularly checking your score can give you an idea of how your efforts to improve your credit are paying off, and it can motivate you to continue managing your finances responsibly.
Take Control of Your Credit Score with GNCU’s “My Credit Health” Tool
One of the most powerful tools available to you as a GNCU member is My Credit Health. This free resource provides you with a comprehensive overview of your credit situation, including your credit score, credit report, and personalized advice for improving your credit.
The My Credit Health tool offers a detailed breakdown of your credit score, showing you the factors affecting your score, such as payment history, credit utilization, and account types. By having access to this information, you can better understand where you stand and take actionable steps to improve your credit health.
Features of “My Credit Health” Tool:
- Free Credit Score Access: Get instant access to your credit score and see how it changes over time.
- Credit Report: Review your full credit report and identify any areas that need improvement or correction.
- Personalized Action Plan: Receive actionable steps based on your credit report to help improve your score.
- Credit Monitoring: Keep an eye on your credit with alerts about changes or new inquiries in your report.
- Guidance on Key Factors: Learn more about the factors that affect your score and gain tips on how to improve each area.
By using My Credit Health, you can take control of your credit score and ensure that you’re staying on track with your goals. Whether you’re looking to buy a home, finance a car, or secure a better interest rate on loans, this tool gives you the insight and resources you need to make informed decisions.
Start Building Your Credit Today
Improving your credit score is a journey, but with consistent effort and smart financial habits, you can achieve significant progress. Whether you’re looking to buy a home, finance a car, or gain more financial freedom, a better credit score can open doors to greater opportunities.
For more resources on building credit, check out our How to Build Credit page, which offers additional tips and insights to help you improve your credit.
It may take time to see results, but don’t get discouraged. Stay focused on your financial goals and keep working on improving your credit habits. In the end, the effort you put in will pay off, providing you with better financial opportunities and greater peace of mind.
GNCU: Your Financial Wellness Partner
If you’re looking for additional support, GNCU offers free financial coaching to help you reach your financial goals. Whether you’re managing debt, improving your credit, or saving for the future, our financial coaches can provide expert guidance tailored to your unique situation. Financial coaching services are available to all members and can help you create a personalized plan to achieve financial success. You don’t have to go through this journey alone—our financial experts are here to assist you every step of the way.
Looking for more financial tips? Explore Greater Nevada Credit Union’s financial wellness resources to help you achieve your financial goals, or schedule a session with one of our financial coaches today.
