Your credit score is one of the most important measures of your financial health. It tells lenders at a glance how responsibly you use credit. The better your score, the easier you may find it to be approved for new loans or lines of credit. A higher credit score can also open the door to the lowest interest rates when you borrow.
if you'd like to improve your credit score, there are a number of simple things you can do. It takes a bit of effort and, of course, some time. Here’s a step-by-step guide to achieving a better credit score.
Follow these 5 tips to increase your credit score and get more financial freedom.
1. Pay Your Bills On Time
Make sure to pay your regular bills on time, in the right amount, every month. Each missed payment can negatively impact your credit score. Staying on top of your payments can increase your score over time.
2. Don’t Close Unused Accounts
As long as your credit cards or accounts aren’t costing you money (like with annual fees), it may be worth it to keep them open. Closing an account can affect what’s called your “credit utilization ratio”. In other words, it can appear as though you are using a higher majority of your credit limit, which can negatively impact your score.
3. Pay Off Debt
Don’t let your debt sit there collecting interest. Try to at least make the minimum payment every month and pay off as much of your debt as you can. This should be one of your top priorities when it comes to achieving financial freedom.
4. Keep Balances Low
Just because you have a lot of credit available, doesn’t mean you should max out your credit cards every month. Use what you need and pay it off on a regular basis. As a general rule, you should try to spend less than 30% of your credit limit.
5. Don’t Apply For Too Much Credit
Only apply for what you need. The act of applying for credit results in what’s called a “hard inquiry” and can negatively affect your credit score. These inquiries remain on your report for 2 years.
The Bottom Line
Improving your credit score is a good goal to have, especially if you’re planning to apply for a loan to make a major purchase, such as a new car or home. It can take several weeks, and sometimes several months, to see a noticeable impact on your score once you start taking steps to turn it around. However, the sooner you begin working to improve your credit, the sooner you will see results.
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