Here are a few ways you can improve your credit score in 2019.
Around 20 percent of Americans can happily say that they have a credit score at or above 800. With a credit score like that, the financial benefits are endless.
Do you know what your credit score is? A credit score between 740 and 799 is very good, while between 670 and 739 is a good credit score. On the lower end of the spectrum, a score between 580 and 669 is fair and between 300 and 579 is a very poor credit score.
Don’t worry if you don’t have excellent credit quite yet! Here are a few ways you can improve your credit score in 2019.
1. Make Payments On Time
If you’re wondering how to improve your credit score, the first thing to concentrate on is your payment history.
Payment history makes up 35 percent of your credit score calculation — the largest percentage of any category. So, concentrate on paying all your bills on time, every single month.
Even missing one payment can have immediate negative effects on your score. To avoid this, consider setting up auto-payments on all of your monthly bills. This way, with minimal effort, you can make all your payments on time.
2. Don’t Close Old Accounts
Fifteen percent of your credit score is based on the length of your credit history.
Lenders want to see that you have a long history with credit and know how to properly use it. Don’t expect to open up your first credit account and see a score of 800. An excellent credit score takes years to build because of this factor.
Because of this, it’s very important not to close old accounts. Just because you paid off that credit card, doesn’t mean you should close it immediately. Closing an old account will remove that account from your credit history and potentially decrease your credit score.
Instead of closing old accounts, keep the account active by using them every so often. Some accounts, like auto loans, you can’t keep open. But take advantage of older credit cards that remain open as long as you keep the accounts active.
3. Increase Your Credit Limits
If you’re wondering how to raise your credit score, you should increase your credit limits.
Just like the age of your credit history matters, so does your credit limit. Increasing your credit limits helps decrease your credit utilization ratio. So the next time you get an offer from a credit card company to increase your spending limit, take them up on it.
This is a great step to take especially if you currently have bad credit. Take advantage of online loans that don’t require credit checks. By opening a new account, you increase your credit limit and your credit score will rise in no time.
4. Decrease Your Credit Use
We’ve mentioned your credit utilization ratio before, but it’s important enough to repeat. This ratio the amount of credit you’re using, divided by the amount of credit available to you. The lower your ratio, the higher your credit score.
So, just like increasing your credit limits helps, so does decreasing your credit use. Try to keep a minimum balance owed on all your credit cards and pay off those loans as quickly as possible.
Potential lenders like to see that you’re responsible enough to earn a large credit limit but not actually use it. This shows that you know how to pay back lenders and care about your financial history. Which translates to a lower interest rate between you and the potential future lender.
5. Diversify Your Accounts
It’s important to remember to diversify your account types. Having different types of credit contributes to 10 percent of your overall credit score.
A lender likes to see that you are knowledgeable in all types of loan transactions. These could include credit cards, home or auto loans, student loans, and even medical debt.
The more account types you have, the better. Just remember that having several account types doesn’t mean you need a high credit utilization rate!
6. Dispute Incorrect Information
A quick and easy way to improve your credit score is to dispute any incorrect information.
Request a copy of your credit report and look for anything that you believe is wrong. This could be an old medical bill that’s still listed with a balance owed or a loan reporting a late payment when you’ve always been on time. Once you find an error, begin taking steps to resolve it.
Contact both the credit bureau you received the score from and the company that provided the information.
7. Stay In The Know
And the most important tip for improving your credit score is staying in the know. By knowing how your credit score is determined and what your credit score looks like, you stay in control.
Websites like Credit Karma or Credit Sesame check your credit score without producing a hard inquiry on your history. This means you can check your credit score as frequently as you want without damaging your score.
We recommend checking a site like this once a month to inventory where your score is. Study any changes to your score and try to determine what caused the change. Then, figure out what step to take next to improve your score.
Improve Your Credit Score for Financial Freedom
Now that you know how to improve your credit score, you’re on the road to financial freedom.
The most important thing to remember is that there are many factors that make up your credit score. If you concentrate on just one of the above factors, you won’t see an improvement in your overall score. Instead, you need to balance all of the factors to prove your financial knowledge.
Having good or excellent credit gives you the opportunity to receive lower interest rates when applying for home or auto loans. You’ll also receive better credit card offers and more negotiating power during financial deals. What more could you ask for?
Now that you’ve conquered your credit score, explore the news section of this site to learn more useful information.