Overcoming obstacles to improving your credit score is never as easy as it sounds, and honestly, there are no magic buttons that you can push that will cause your score to skyrocket over the course of a few days, weeks, or even months, but there are steps that you can take that will start you on the path to good credit sooner rather than later.
- Pay your bills on time, every time. Your payment history makes up about 30% of your credit score, so even one late payment can seriously damage your credit score. And remember, it’s not just your credit cards that need to be paid on time. It’s also your mortgage, your car payment, your utility bills, your doctor bills, everything. So sit down every month, every week, or every time you get paid and pay your bills first. Then you can have that new outfit, or that extra night out, or whatever you’ve been craving… just make sure the bills are paid first.
- Pay attention to your credit card balances. Sure, it’s easy to tell yourself that you can put that vacation, or that new living room furniture, or even that new television on a credit card, but if that puts you over the 30% usage limit on the card (or on all your cards), then you could see your credit score suffer simply because you’re using too much of your “available credit.” So, do yourself a favor and use your credit responsibly. And in the event that you do have to use more than 30% of your available credit? Pay it down below that level as quickly as you can. Available credit is another 30% of your credit score. Use it wisely.
- Pay off any small balances on credit cards. For example, let’s say you have a couple of store credit cards with balances under $100.00, along with a couple of major credit cards, also with balances. Pay off the small store credit card balances first and then use those cards sparingly. Why? Because one of the items that is considered in credit score calculations is just how many of those small balances that you carry. So, the sooner you pay those off, the better it looks when your credit score is updated.
- Don’t try to get good debts removed from your credit report. By “good debts,” we mean those paid in full car loans, zero balance credit cards (don’t close the accounts), or even a paid in full mortgage. This illustrates that you have a good history of paying your bills on time, especially when it’s a long term commitment like a home or car loan, and looks attractive to the next lender that you may approach to buy that next car or that new home.
- Be careful of the number of credit inquiries you initiate. Although it’s not a huge part of your credit score, every time there is a “hard inquiry” on your credit report, it can and does affect your score for up to two years after the inquiry. So, if you’re shopping for credit cards, or a new car, or even a home, try to keep the number of credit inquiries at a minimum (and within a short time span, if possible). The easiest way to keep your credit inquiries to a minimum? Know your credit score and only apply for those credit cards and loans that fall within your credit scoring range. For example, don’t apply for a credit card that requires your credit score to be excellent if you know that your score is only fair. Instead, apply for a credit card that is specifically for fair credit – you’re more likely to be approved and you’ll only end up with the one credit inquiry.
Remember, when it comes to good credit, it’s a marathon, not a sprint, and time is the best cure that there is for a poor credit score.