Whether you’re applying for a mortgage or a credit card, your credit score is a three-digit number that gives a lender a good idea of your creditworthiness or risk. A higher score, usually above 700, implies that you have a strong history of on-time payments and responsible borrowing, while a lower score implies that you had some trouble in the past or are currently having trouble with your loans. It could be that your debt problems are over, but your credit score is still sending warning signs to lenders.
Review Your Credit Reports Often
Looking at your credit report, which is available for free from each of the three credit reporting agencies annually, won’t have a direct impact on your credit score. But, reviewing your reports on a regular basis can help you spot any errors in them. For example, you might have recently made payments on a debt and your report might still show it as being past due, which can have a negative effect on your score. In cases such as that, you can dispute the error and the credit reporting agency will look into it. If it is a real mistake, the agency will correct it, which can give your score a boost.
Get in the Habit of Paying on Time
Your payment history plays a big role in determining how high or low your score is. Getting in the habit of paying on time, all the time can increase your score in the long run. If you’ve recently been enrolled in a debt management program, you most likely already got in the habit of making a monthly payment on or by its due date. If you have any debt payments remaining after the program has ended, keep up the momentum of paying them in a timely way.
There are two ways to make it easier to remember to pay on time. The first method is to schedule a monthly reminder in your calendar so that you get an alert a day or so before your payments are due. Another method is to set up automatic payments so that the money is transferred from your bank account to the account due without you having to lift a finger.
Keep Your Balances Low
The amount you owe on certain types of accounts also has a big influence on your score. If you are still using a credit card, aim to keep the balance on it lower than 10 percent of your spending limit, to help increase your score. A good policy to have is to only use your credit card when you have the cash on hand to immediately pay it off, then make every effort to pay your balance in full right away.
Be Careful About Opening or Closing Accounts
Once you’ve paid off certain credit cards, closing those accounts can give you a sense of accomplishment. But, since a portion of your credit score is determined by the length of your credit history, closing accounts, particularly ones in good standing, can work against you. You’ll also want to be careful about opening new accounts, as doing so will temporarily lower your score. Leave your old accounts well enough alone and only open new ones when you absolutely need to.
Working to improve your credit score can take some time. But, the lower interest rates and better loan terms you’re likely to get make the effort worth it. If debt is holding you back from a great credit score, get in touch with CESI Solutions, today!
Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
CESI is NOT A LOAN COMPANY