If you’ve ever wondered, “What’s my credit rating?” It’s probably time to find out. Having a good credit score can make life a lot more affordable. If you’re about to buy a house or a car, for example, the higher your credit score, the lower your interest rate (and therefore your monthly cost) will likely be.
Your number can also be the deciding factor in whether or not you can get a loan and, ultimately, whether you are even able to buy something you want or need.
So, yes, the goal is to have the highest possible credit score, but increasing the number doesn’t happen overnight. There are some important steps to take if you want to increase your score, and the sooner you start working on it the better.
“If you’re trying to dramatically increase (your credit rating) to achieve a goal, you’re really going to need as long as possible,” said Thomas Nitzsche, director of media and branding at Money Management International. , a non-profit financial advice and education provider that advises people on how to legally and ethically improve their credit scores on their own.
If you have fair credit and are trying to improve the number for a home purchase, for example, you’ll want to start working on it at least a year in advance, he explained to TMRW.
But even if that seems a long way off, there are things you can (and should!) Start doing right now to increase that number. Below, see seven things you should do – and shouldn’t do – to help improve your credit score:
1. Examine your credit report
The first thing you’ll want to do is grab a copy of your current report so you know where you are at. You can get free reports from all three agencies – TransUnion, Experian, and Equifax – at annualcreditreport.com. Nitzsche said it’s important to take a moment and understand the financial snapshot of where you are today and where you want to be.
You’ll also want to take some time and research any errors in your report that could negatively impact your score. “If your name is misspelled, it won’t hurt your score,” he explained. “But if you see a late payment or a missed payment (that’s a mistake), or maybe you have an account that should be paying but isn’t, then that’s a problem and it will have a impact on your score. “
If there is an error, you should dispute it and try to provide as much evidence as possible.
Another thing: you can also ask a creditor to remove an issue if it has been fixed (i.e. if you have paid a collection debt). Nitzsche said it didn’t hurt to ask and the worst thing they could say was no.
2. Have good financial habits
“The biggest part of your credit score is payment history, so the most critical thing is to never miss a due date,” Nitzsche said. Set up a monthly automatic payment or add all due dates to your calendar so you never miss an invoice.
You can also get a higher score when you mix different types of accounts on your credit report. It may seem counterintuitive to get extra points for having debt in the form of student loans, mortgages, and auto loans, but as long as you pay them off responsibly, it shows you are reliable.
3. Try to use 30% or less of your credit at some point
Know your credit card limit and try not to use more than 30% of that number each month, otherwise your score could drop points for overusing credit.
Another thing you can do is ask your bank to increase your limit. “This will give you more flexibility to spend more,” Nitzsche said. You can also pay it off twice a month to keep the balance low. But he warns that you never know when the balance will be reported to the office. It can happen at any time of the month, so it could be the day after payment or the day before. “You don’t necessarily want to use the card and pay for it the next day because that doesn’t give the office a chance to know you’re using it,” he said.
4. Avoid new credit requests
If you’re looking to boost your score when it comes to buying a home or car, you won’t want to open a new line of credit, like a retail card, credit card, or loan. That’s because “hard” credit inquiries like these can lower your score, and sometimes it boils down to a few points as to whether you’re approved or what your rate will be, Nitzsche said.
“Soft” credit checks, such as when an employer checks your credit or when you write your own report, will not affect your score.
5. Keep all accounts open, even those you no longer use
Even if you’re not using that college credit card, it’s a good idea to keep it open, as closing it could hurt your score. Nitzsche explained that you will receive points for each account closed. If you want or need to mentally break away from a card, just chop it up instead.
6. Build up your credit if needed
If you haven’t established credit yet, you might not even exist … in the credit report space, that is! “If someone has never defaulted on subscriptions or utilities or had a collection of anything and has not used credit cards or loans during the past seven to 10 years, he may not have a credit profile at all, “Nitzsche said. “It is a challenge when you want to buy a house. “
If this sounds familiar, you may need to get a secure credit card that you deposit a deposit into, he advised. “You should always make payments and use it responsibly. Not all banks offer them, but you can usually check with your local bank or credit union.
7. Ask for help
There are many credit monitoring apps and services that can help you stay on top of your credit score. You can also contact a professional credit counselor who can help you navigate your specific situation. (Here’s a good resource for finding reputable service.)
One more thing: Nitzsche warned that everyone should beware of credit repair scams that claim they can increase credit scores for a fee upfront to get specific negative information removed (even temporarily) from credit reports.