Need a few tips to improve your credit score in 2020 to take advantage of low-interest rates? Here are a few of the best things you can do to raise your credit score fast.
Credit Score Tip #1: Pay Every Bill on Time
Your score is meant to reflect how well you manage your finances and pay your bills. If a bill doesn't get paid on time, it will negatively affect your score. If it happens multiple times, it's seen as a trend and can cause your score to tank fast.
That's why the best thing you can do for a good credit score is to make sure you pay every bill on time. Utility bills, credit card bills, student loan payments, mortgage, everything.
Ideally, you're able to pay more than the minimum payment on your credit cards. But if the minimum is all you can afford right now given our crazy world, that's better than nothing. At least your score won't take a hit.
Credit Score Tip #2: Lower Your Debt Balances
Experian, Equifax, and TransUnion are the 3 big credit bureaus. They each have their own way of creating your score, but all of them take into account your debt balances.
If you have a lot of debt, your credit score will suffer. One way to increase your score is to pay off your debts, especially revolving debt such as credit card debt. Paying off credit card debt improves your utilization ratio, which is essentially a ratio of your current debt divided by the balance.
For example, let's say you have a $3,000 balance on a credit card with a maximum of $6,000. That means your utilization ratio on that card is 50% ($3,000/$6,000.) The lower your ratio, the better your credit score will be.
Credit Score Tip #3: Avoid Applying for Lots of New Credit
It's okay to apply for new credit every now and then. When you need a new car loan, go ahead and apply. Refinancing your mortgage? Go for it. But avoid doing too many of these things at the same time. Try to space them out at least a few months, if not more.
Credit bureaus look at how many inquiries occur. Too many at once will be a red flag, indicating you may not be in a good financial position. This can lower your credit score.
Tip #4: Keep Old, Unused Credit Cards Open
As long as your old credit cards don't cost annual fees, it doesn't hurt to keep them open. Closing an account will increase your credit utilization ratio and probably lower your credit score.
If you're tempted to use the card, find a way to make it hard to use. Freeze it in a block of ice or cut it into small pieces. Whatever it takes to keep the account open but prevent yourself from using it.
Tip #5: Check Your Credit Report for Inaccuracies
Accidents happen. Technical glitches occur. Sometimes your credit report may have something that's incorrect, so check them at least once a year. If you find anything that's wrong, make sure you address it ASAP. It's affecting your credit score, plus there's a chance your identity was stolen.
Do you have any other questions about how to improve your credit score or the mortgage process in general? Give us a call at (877) 306-0222 and we'll help answer any questions you have.