Maintaining a good credit score is an important part of building your financial future. Not only does your credit score help lenders determine your credit risk, but it also affects the interest rates and fees you pay. Without a good credit score, you’ll have difficulty securing a loan or mortgage down the line. But don’t stress! If you take action to improve your credit score now, it will start increasing in no time.
What makes up your credit score?
Understanding your credit score is a crucial piece of planning your financial success. The bulk of your credit score is made up of your payment history (such as on time or late payments) and the amount owed. Additional factors include the length of credit, new credit (or the accumulation of debt in the last 12-18 months), and the type of credit.
What will hurt your credit score?
Maintaining a good credit score means being cautious with how your handle your money. Your credit score can be negatively impacted by:
- Missing or late payments
- Maxing out credit cards and shopping for credit excessively
- Opening up numerous loans and credit cards in a short time frame
- Closing credit cards out (as this could lower your available capacity)
- Borrowing from finance companies
How to improve your credit score
Poor credit won’t haunt you forever, and it’s still completely possible to turn your credit score around! While there is no quick fix, there are long-term improvements you can make to help boost your score over time.
Here’s what you can do to better your credit:
- Pay your bills on time – You may have to set a reminder on your phone so you don’t forget, but this is very important!
- Pay off or pay down your credit cards. Come up with a payment plan that focuses on paying down the highest interest cards first, even if that means maintaining minimum payments on your other accounts in the meantime. The goal is to keep credit card balances low and pay them off when possible.
- Don’t close credit cards – This may decrease your capacity, thus negatively impacting your score.
- Slow down on opening new accounts as this approach could backfire and actually lower your credit score.
- Contact a financial advisor or creditor if you’re having trouble making ends meet. They will help you better manage your credit and pay on time.
Don’t let your credit score stop you from bettering your financial future! Use our guide to managing your credit and getting out of debt for additional tips and resources, or stop into your local branch to speak with a representative!