Your credit score is one of the earliest hurdles adult life can throw up in your path. A lackluster credit score can impact a lot of your big life decisions, from paying off student loans to buying a first home. Improving your score takes time and research, and often some aspects of your credit score can feel out of your control. We’ve compiled a few small ways to take control of your credit and improve your score gradually over time.
Avoid Late Payments
This seems like the simplest advice we could offer, but it stands true. Late payments can tank a credit score quickly, whereas keeping up with a monthly minimum payment is quick, easy, and can even stand to boost your credit. Depending on your creditor, you may also stand to gain from discussing a late payment with them, especially if you have a good payment history. They may remove the penalty based on your chat with them, so be sure to check in if you know that you won’t make a habit of paying late.
Keep an eye on your credit card balance and consult your bank account before making any large purchases.
Check Your Credit Score
You are entitled to at least one penalty-free credit report per year, so be sure to look at it when you’re thinking about shaping up your credit to ensure that you’re not being penalized for anything out of the ordinary or that could be easily explained to the agency reporting your credit. It also gives you a chance to review your credit history and see what choices helped you and which may have been detrimental to your credit.
Ask to Extend Your Credit Limit
Worried about overspending or exceeding your available credit? Avoid the stress by inquiring with your card issuer as to whether or not you can increase your credit limit. Your issuer might complete a hard credit inquiry to do this, so be sure to confirm with them whether or not a hard inquiry will be necessary, as hard inquiries might drop your credit score a bit by pulling your credit report. Having a higher credit limit might allow you a bit more freedom with your spending, which can only stand to increase your credit score if you make payments on time.
Know and Avoid Exceeding Your Credit Utilization Rate
Thirty percent of your credit score is based on your credit utilization rate, or the ratio of your credit card balances to your credit limit. Credit scores are intended to evaluate your ability to pay back on loans and borrow money responsibly, and if you consistently notice that your credit card balance is near your credit limit, you might want to rethink how you’re repaying and spending. Higher credit card balances are difficult to pay back and can incur heavy interest rates upon late payments, so keeping your utilization rate low can not only improve your credit but can also ensure that you’re drawing on credit lines responsibly.
Don’t Put Off Paying Off Debt
Another no-brainer, but debt contributes greatly to your credit score evaluation and can plague your credit score the longer you leave it hanging. If you’re in a position financially to work toward paying off things like student loans or credit card debt, doing so can gradually build back up your credit score and help you stay on task with your financial goals. As a bonus, at the end you’ll have paid off your debt and increased your credit score—win-win!
Be cautious when paying off debt, as there can be ramifications to paying off debt that is on a charged off account.
Check out these resources for tips on creating debt payment plans:
Open a New Line of Credit
Mixing up your current lines of credit can diversify your credit portfolio and increase your credit score as long as you’re making payments on any loans and staying responsible with your finances. Adding a new element can be as easy as opening a new credit card. What’s more, opening a secured credit card will ensure that you get a credit boost, as there’s no chance of failing to pay your balance on time.
If you don’t think opening a new credit line is in the cards, keeping open credit cards or other lines of credit you might not use that often can help continue the diversification of your credit mix, as it aids your credit utilization ratio.
Collaborate on Credit
This goes along with diversifying your credit. Perhaps at some point when you were opening a bank account or signing up for a credit card your bank required you to have a custodian or co-signer. Becoming a cosigner for a loan or credit card is essentially extending the responsibility to pay back borrowed funds to you and the initial borrower—it should be noted that collaborating in this way should only be done with someone you trust.
Check out these articles for more ways to improve your credit score: