A good credit score is necessary to get a lot of critical things, including house and car shopping, and having a bad score will hold you back. But a bad score isn’t permanent. Rebuilding your credit history, or taking steps to improve your credit score, will open up opportunities more readily for you. Here are five hacks to improve your credit score.
- Keep balances on your cards below 30 percent
Your credit score can take a major hit if you start carrying a debt on your cards worth more than 30 percent of the total credit you’re allowed. Don’t let this accumulate—pay down your credit card bills as they come in, and avoid accumulating debt.
Having a high balance on your card every month, even if you pay it off in full, can also negatively affect your credit score; if you suspect that’s the case, consider making multiple payments a month to your credit card company to keep your total balance low at all times.
- Don’t have unpaid balances across credit cards
If you’re accumulating debt across multiple credit cards, even in small amounts, that’s a red flag to lenders. Trying to minimize your debt on any one credit card is understandable, but avoiding it by accumulating small pockets of debt across cards doesn’t help; it just makes you seem like a creditor who can’t pay off balances.
Remember, a credit score is a cumulative report of all your accounts. Even if you spread your debt around, it will add up and bring down your score. Be sure to think critically about what card you want to use if you have multiple cards, and remember what cards you used every month so you remember what bills to be looking out for.
- Keep good debt on your credit history
Negotiating all debts out of your history as soon as they’re paid up is a bad idea. Good debt in your history—that is, a personal loan that was paid off on time and in full—is a great thing to have on your history. It shows that you’re a reliable lender who can handle accumulating debt and then paying it off responsibly.
The goal of your credit history isn’t to show that you’re a light spender, but to show that you’re a responsible spender who can pay back your debts. Leave good debt on your history as long as possible. Don’t close accounts that you had a good payback schedule on. Those help your score.
- Create good debt history by paying everything back on time
Make sure you have all your payment dates clearly in writing, and take the time to document it somewhere to remind yourself every month. The most surefire way to improve your credit score is to maintain a debt-free history.
Pay off your credit card balance in full every month; minimum payments trap you into paying interest rates and taking hits on your credit score, because it shows lenders that you’re unreliable or unable to calculate how much you’ll be spending in any given month. Rather than shoot yourself in the foot by letting debt grow, do your best to pay off that entire balance with every bill, and make sure that payments are filed on time.
- Plan ahead
If you know you’re going to be showing someone your credit history for an application in the next few months, order a free copy of your credit score ahead of time. This gives you a chance to know what to expect when you do need to show lenders your score, and it gives you the chance to confirm that everything is correct.
Dispute errors on your credit report as soon as you see them. Errors are not uncommon and can unfairly hurt you if you don’t identify and dispute them.
Be sure to plan accordingly; just order one report, and don’t feel the need to double or triple check. Checking your credit multiple times can also lower your credit.
Keeping your credit score high seems like a tedious task filled with contradictions and tricks if you’re worried about your score. But the best thing to keep in mind is pay all debt off on time. The best way to improve your credit score is just to show that you’re reliable, and that means keeping up with payments every month.