With interest rates higher than they’ve been for some time, the time is ripe for upping your credit score to assure lower rates. Below are some general steps to help raise the average person’s credit score.
Build Up Your File
There are three major, consumer credit bureaus – TransUnion, Equifax and Experian.
Opening new accounts that will be reported to these three—most major lenders and card issuers report to all three—is an important first step in building your credit file. You can’t start laying down a good track record as a borrower until there are accounts in your name, so having at least several open and active credit accounts can be helpful.
If you’re starting from scratch with no credit file at all, the most important step is simply getting a credit report with a bureau.
Don’t Miss Payments
Your payment history is one of the most important factors in determining your credit scores, and a long history of on-time payments can help to achieve excellent credit scores.
Setting up automatic payments for the minimum amount due can help to avoid missing payments (as long as you’re careful not to overdraft your bank account). If you’re having trouble affording a bill, reach out to your credit card issuer right away to try and discuss hardship options.
Catch Up on Past-Due Accounts
If you’re behind on your bills, bringing them current could help. While a late payment can remain on your credit report for up to seven years, having all your accounts current can be good for your scores. Additionally, it stops further late payments from being added to your credit history as well as additional late fees.
Pay Down Revolving Account Balances
Even if you’re not behind on your bills, having a high balance on revolving credit accounts can lead to a high credit utilization rate and hurt your scores. Revolving accounts include credit cards and lines of credit, and maintaining a low balance on them relative to their credit limits can help you improve your scores.
Limit How Often You Apply for New Accounts
While you may need to open accounts to build your credit file, you generally want to limit how often you submit credit applications. Each application can lead to a hard inquiry, which may hurt your scores a little, but inquiries can add up and have a compounding effect on your credit scores. Opening a new account will also decrease your average age of accounts, and that could also hurt your scores.
For more information on understanding your credit score, check out Karen’s easier blog post, Credit Score Touchdown!.
Karen would love to answer any of your real estate questions and assist you in any way. Please contact her today to get started.
