3 of the Best Ways to Boost Your Credit Score
According to BankRate, a credit score of 740 opens you up to the most favorable interest rates for credit cards and other loans. While you can still attain credit with a lower credit score, it generally comes with higher rates and fees.
You can get your credit score from several financial services for a fee, or by signing up for credit protection services. If you want to see your number without cost or obligation, try Credit Karma or AnnualCreditReport.com .
Once you know what you credit score is, it’s time to get to work on improving it. Take the following steps to boost your score.
Develop your credit history
To improve your credit score, you first need a credit history. You can start by applying to open a credit card account* or getting a loan, and paying each of these obligations on time each month.
Be mindful to obtain new accounts gradually. If you try to get several credit cards at the same time, lenders may deem your behavior as risky and reduce your score.
Fix mistakes in your credit report
The information in your credit report determines your score, so check your file to make sure everything is correct. Mistakes can happen due to clerical errors, such as misinformation coming from someone who shares your name, or in worse cases, identity theft. If you were an unknowing victim of identity theft, credit accounts could have been opened, used and never paid.
Verify that merchant names, transactions, amounts owed, amounts paid and payment dates are all correct. If you find anything amiss, report it to the reporting credit agency and financial institution immediately so they can correct the error.
Reduce your balances
Nearly a third of your credit score is based on how high your balances are in relation to your credit limit, according to the U.S. Small Business Administration . This is known as the debt-to-credit ratio or credit utilization. A low number, preferably under 30 percent, means you owe less than you can borrow, which is what creditors like to see.
The easiest way to reduce your credit utilization ratio is to pay off as much of your credit card and loan balances as you can each month. You can also improve your ratio by asking your card company to increase your credit limit. A credit line increase can be granted every six months at most banks.
Once you have applied the strategies outlined above, continue to check your credit score at least once a year to monitor their impact. To learn more about credit, read our Financing 101 article on credit basics.