If you are looking for ways to give your credit score a boost, you are not alone! Perhaps you are looking to be approved for a loan or a credit card? Perhaps you are beginning your search for a home? You also do not need a reason to improve your credit. Excellent credit is an excellent asset! Here are three ways to give your score a boost (and one thing not to do!).
Three ways to boost your credit score:
1. Ask for a credit limit increase. It does not hurt to ask, right? By increasing your limit, you are decreasing your credit utilization ratio – the percentage of your credit limit that you are using. For example, if you have a limit of $5000 and you are using $1000, that would be a 20% credit utilization ratio. Now, supposed your bank increased your limit to $8000. With just a phone call, you are now looking at 12.5% credit utilization ratio (assuming you still have that $1000 balance)!
2. Pay down credit cards. Again, this has to do with your credit utilization ratio. If you have a $5000 limit and you pay $500 on your $1000 balance, you just decreased your ratio from 20% to 10%!
3. Pay on time! Payment history makes up about 35% of your credit score. Paying on time = increased score. Missing a payment = (drastically) decreased score.
One thing not to do:
Do not close a credit card unless you really think it through! There are potentially two consequences to closing your credit card. One is the credit utilization ratio (yes, going back to that!). When you decrease your spending limit, you are increasing that ratio. The other potential consequence is losing that length of credit history. If you close an account with ten years of credit history, and the next longest account that you have is six years old, you just lost four years of credit history!
Final Thoughts:
Since your credit score takes into account financial behavior from years past, credit repair takes time. The best way is to consistently be responsible and pay your bills on time – every time. The above ways will help; however, consistency is key. The sooner you start on the road to repairing your credit, the better – and the more money you can save! Click here to learn about the five factors that make up your credit score.
