Your credit score is important if you want to be able to make any large purchases or open credit lines. Most financial institutions use your credit score to decide whether to offer you credit. Therefore, it is important to have a good credit score, even if you are not sure you are going to use it.
If your credit score is already in not great shape, do something to fix it. Here are three ways to increase your credit score.
You Can Improve Your Credit Score
The most important thing to remember about your credit score is that it is fluid and constantly changing. If you have a bad credit score, don’t give up on fixing it. It is a temporary look at your credit history and a few simple actions can easily change it. Essentially, you are going to change your credit score through positive actions.
Correct Your Credit Report
The first thing to do is to check your credit report and address anything that is wrong with it. You can get it free once per year from the credit agencies. If you find anything that is incorrect, contact the agency to see how you can fix it. This may require some work on your end and the credit agency’s end, but it is worth it. A single bad entry can mean the difference between a good score and a bad score.
Pay Off (Most) of Your Debts
Fixing your credit history is as simple as paying off your debts. If you have outstanding debts on your report and currently owe a lot of your total credit limit, then your score will drop. Since it is based on the value of your total debt compared to your total credit limit, lowering your debt to free up more of your credit limit will raise your score.
Don’t pay off all of it, though. Keep about a quarter of your debt if possible. This will help you build a better credit history.
Use Your Credit Productively
Once your outstanding debts are handled, use the remainder of your debt to build a better history by paying bills completely and on time. One way to do this is to pay your monthly bills using your credit card; then pay off your credit card bill with the money you saved to pay your bills. This will show the credit agencies that you can manage your credit effectively and will slowly strengthen your credit score over time. It will also help make it resistant to smaller bad actions, such as if you miss a payment deadline or an emergency happens and you can’t pay your bill.
Your credit score is fluid and can easily be changed with a bit of effort and know-how. If you want to make improvements for the long term, reduce the amount of credit debt you have by eliminating bills and stop acquiring new credit payments. Keep the amount of credit that you have to pay back under control. This will make it easy to build a better credit score since you will be able to pay back your bills.