Your Financial Report Card: How to Improve Your Credit Score.
Photo by Ryan Born on Unsplash
Your credit score is like your financial report card.
It gives your potential lenders, landlords, and other financial institutions an idea about how reliable you are when it comes to paying back debts.
And just like a good report card can open doors for you, a good credit score can make it easier to get approved for a loan, a credit card, or even a rental apartment.
But what exactly is a credit score and how do you go about increasing it?
A credit score is a three-digit number that ranges from 300 to 850, and it’s based on your credit history.
It takes into account things like your payment history, the amount of debt you have, and the length of your credit history. The higher your score, the better your credit.
Now, you might be wondering, “But I’ve never had a credit card before, so how can I have a credit score?” or “I’ve made some mistakes in the past, so my credit score is already shot.”
But the truth is, no matter what your current credit situation is, anyone can improve their credit score.
Take the example of Oprah Winfrey, who had a rough start regarding credit. She racked up a lot of debt in her 20s and it took her a while to get her credit back on track.
But she didn’t give up.
She paid off her debts and made sure to pay her bills on time. Now, she has an excellent credit score and shares her learnings with the world.
The point is, no matter what your current credit situation is, anyone can improve their credit score. The key is to be consistent and take the necessary steps to improve your credit.
5 Simple Steps to Improving Your Credit Score
Step 1: Check your credit report
The first step in improving your credit score is to check your credit report. This will help you set up the baseline and show what you need to work on.
You can get a free credit report from the three major credit bureaus once a year.
Step 2: Pay your bills on time
Payment history is the most important factor in your credit score, so make sure to pay your bills on time.
Late payments can stay on your credit report for seven years, so it’s imperative that you stay on top of your bills.
Step 3: Keep your credit card balances low
The amount of debt you have is also a factor in your credit score.
High balances on your credit cards can make it look like you’re overextended. So, don’t give into the temptation and keep your balances low.
Step 4: Don’t close old credit accounts
The length of your credit history is also a factor in your credit score. So, if you have old credit accounts that you’re not using, don’t close them.
This will help to increase the length of your credit history.
Step 5: Dispute errors on your credit report
If you find errors on your credit report, dispute them.
Otherwise, these errors can negatively impact your credit score.
Final Thoughts
No matter what your current credit situation is, anyone can improve their credit score.
It’s all about being consistent, paying your bills on time, keeping your credit card balances low, and checking your credit report for errors.
Remember, it takes time and effort to improve your credit score, but the reward is well worth it.
Read More: 7 Worst (And Common) Money Mistakes to Avoid
