According to CNBC, the average FICO credit score hit an all-time high in 2019, reaching 703. While it’s great that more consumers are enjoying higher credit scores, you aren’t alone if you’re worrying about how to improve your credit score. Your credit score plays a major role in your ability to borrow money, so it’s important that you maintain it and keep an eye on your progress. After all, your credit score can affect your ability to buy a house, purchase a car, rent an apartment, or secure your dream job. It can also impact your utility rates, your insurance premiums, and even your love life! It may take a little time, but you can steadily increase your credit score with the right approach and a positive mindset.
How to Improve Your Credit Score
FICO recently announced that it’s making some changes to its scoring model that could negatively affect the credit scores of millions of Americans. Changes to FICO’s scoring system are nothing new; the company makes updates roughly every five years. This year’s biggest change revolves around making personal loans a separate category and considering how they are being used, and FICO’s alterations to its methodology could drop the credit scores of about 40 million Americans by 20 points or more, according to NPR. Meanwhile, an equal number of people will likely see their scores rise by around 20 points.
Whose scores are most likely to be hurt by the changes? Experts suspect that consumers with credit scores at or below 580 are most vulnerable. Fortunately, there are several effective ways to improve your credit score:
Check Your Credit Reports
Mistakes happen, and when they happen on credit reports, they can drag your credit score down. Investopedia suggests that anyone who wants to raise their credit score should request copies of their credit reports from the major credit bureaus, review them carefully, and request that any errors be corrected.
Pay Your Bills
As MyFico indicates, paying your bills properly in full and on time is a major factor in the determination of your credit score; it makes up 35 percent of the calculation. Therefore, if you want to polish your score, ensuring that your lenders and creditors get their payments promptly is key. What if you have a history of late payments? There’s no way to quickly wipe that away, but it will be less of an issue over time, so concentrate on making sure any current and future bills get paid. Whether you use a calendar to write down due dates or take a more modern approach and rely on a reminder app, develop a system that helps you stay on track. Then, use it consistently.
Pay Down Your Obligations and Debts
Using credit is vital to building a strong credit history, but taking on too much debt can sink your score. If you are currently carrying a lot of debt, make an effort to pay it down. Do you have high-interest credit cards that are nearly maxed out? Debt.org suggests creating a plan to pay down your debts and slowly chip away at those large balances.
Mind Your Credit Utilization
Your credit utilization ratio describes how much credit you’re actively using in comparison to how much credit is available to you. According to Credit.com, you should aim to keep your credit utilization at 30 percent. How do you do it? Controlling your spending is one obvious answer, but it’s not the only one.
Have you ever wondered why experts urge consumers to hold onto old credit cards that they never use? Closing those accounts would reduce your available credit and negatively impact your credit utilization. As a consumer, you clearly have control of how much credit you use, but it’s easy to forget that you also have significant say in how much credit is available.
Mix Up Your Credit
To build a good credit history, you need to use credit. To improve your credit score, consider mixing up the types of credit that you use. As NerdWallet explains, using different kinds of credit helps persuade creditors and credit bureaus that you are a savvy consumer who can use credit responsibly.
Whether your credit score is below par, on the rise, or spectacular, the loan experts at PrimeLending of Springfield, Missouri, can help you achieve your housing goals. We listen carefully and offer personalized service that is tailored to your needs. How can we help you reach your housing dreams? Contact us today to find out.