It’s important to know how you can improve your credit score.
Don’t use more than 30% of your available credit
This one is a huge factor in your score and can be easy to adjust in your favor.
Why it’s important:
High balances make you look riskier to lenders. But it’s not how much you owe, it’s the percentage of your available credit that counts. It’s also not what some people call your “debt to income ratio” because credit reporting agencies don’t know your income. A better term might be “debt used to debt available ratio.” For example, if you have $1,000 credit available on a credit card, try to not use more than 30% or that, or $300. The “percentage” is the important thing here which is why you can often adjust it.
How you can adjust it:
If you can’t afford to pay down on your balances, then increase your credit available to lower your ratio. One way to do this is to simply request a higher available credit balance. You can often increase it as often as every few months. You can request it online or through your credit card’s app. It never hurts to ask. Another way is open another credit card either by yourself or with a co-signor. The key is to not use all of the available new credit. Instead, leave it as available credit.
#2 Pay your bills on time
When a payment is late, credit bureaus are notified and your score drops significantly. In fact, 35% of your FICO score is based on your payment history. One late credit card payment could drop your score dramatically. If you find yourself in this situation, it’s worth asking the credit card company to take it off your report as a one-time courtesy also known as a “goodwill deletion.”
#3 Know the difference between a hard and soft inquiry
A hard inquiry will show up on your credit report when you’ve apply for things like a new credit card, a mortgage, or an auto loan. Basically it means a lender is checking your credit — and to be able to do that, it requires your authorization. Too many hard inquiries can make you look a little desperate. Each hard inquiry can lower your score by 5 to 10 points.
Soft inquiries are also credit checks, but don’t affect your credit score and don’t require your permission. These take place when credit card companies check your credit before they mail you pre-approved credit offers, when a potential employer is conducting your background check, or when you’re checking on your own credit.
#4 Monitor your financial health
The best way to monitor your financial health and protect against identity theft is to check your own credit report regularly. You’ll be able to catch errors — whether your own or by others — and address them as soon as possible so that you can be on your way to a better credit score.
Go to annualcreditreport.com and get a free credit report by each of the 3 credit bureaus every year. It’s a good idea to get all three because some lenders might only report to 1 or 2 of the bureaus.
Peter Blinn
For over 35 years, listening to clients and putting them at ease, while finding solutions and helping achieve future goals, in Marion County, Lake County. Citrus County, Sumter County, and The Villages.
