Concerned about your credit history? Here are practical ways to boost your credit score.
Your credit report may stay with you for the rest of your life, but it doesn’t need to be a burden. Ultimately, you have some control over how it presents your financial well-being.
Even if your credit history isn’t great now, it’s never too late to learn how to improve it. With some time, your credit rating can become stellar — and you can be rewarded with faster credit card approval or that big home loan with low rates.
Five ways to increase your credit score
1. Keep your credit report in order.
A good credit score allows you to apply for cards, loans and other credit with confidence.
You can certainly improve your credit rating with a variety of credit options or by keeping accounts open even when you’re not using them to improve your credit utilization ratio. But our five tips are the primary principles for crafting a good credit reputation. After all, you can’t run away from this credit rating business — so you might as well do everything you can to face it with a smile.
2. Maintain an active credit account.
Lenders do not favor borrowers with zero credit history. No previous history of credit means no assurance that you are a responsible borrower, and this puts you in the high-risk category when you apply for a loan. Lenders want to see a proven track record of responsible borrowing and repayment behavior.
This means you need to have credit accounts and keep them in good standing. You can start small by opening a mobile phone plan or an Internet account in your name. Gas and other utility accounts also factor in, as do store credit cards.
Be sure to register them to your name and address, and manage these accounts well.
3. Pay your bills on time.
This tip may sound obvious, but it bears repeating: Paying your bills on time is exactly what lenders want to see on your credit report. Overdue payments can stay on your credit report for years. To avoid this black mark on your credit history, pay attention to those bills and pay them as close to your due date as you can.
To avoid paying fees, penalties and unnecessary interest, consider setting monthly calendar reminders to help you make punctual payments or schedule automatic withdrawals with your bank.
4. Avoid negative listings at all costs.
With responsible borrowing, you avoid the long-term effects of payment default on your credit score, not to mention the mark on your credit report that can linger for up to seven years. More severe marks include court judgments, which can also be listed for up to seven years, and bankruptcies, which potential lenders can see for up to a decade.
If you’re wrongly billed and tempted to refuse paying for something you didn’t use or buy, protect your credit report by disputing the amount after first paying off the bill.
Defaults are difficult, if not impossible to erase from your credit file, so nip them in the bud before they are listed. If you find yourself in a position where you truly can’t make a repayment, consider appealing to your lender for a hardship extension. You might be able to negotiate an alternative and more lenient repayment plan if you explain your situation early.
5. Avoid too many hard credit inquiries.
Each time you apply for a form of credit, your prospective credit provider will likely make an inquiry on your credit report. This “hard” inquiry means that it contacts one or all three of the major credit bureaus to get your credit score — an action that remains on your credit report for two years. Hard inquiries can adversely affect your credit rating: Too many suggests to lenders that you’re desperate for credit and not successfully managing your resources.
To avoid too many hard inquiries, apply for credit only when you’re confident that you’ll be approved. And be conservative with your credit: There’s no sense wrecking your history trying to acquire a stack of credit cards. If you’ve been turned down for an application, wait a while before trying again.
Time is an important factor in credit reporting, because lenders are more inclined to disregard events in the distant past. Even though inquiries stay on your report for years, older inquiries are considered much less relevant than more recent ones.
Tips for a healthy credit report