Building and maintaining good credit can have a major effect on your quality of life, especially if you’re considering purchasing a home, going back to school, applying for a prepaid debit card, or even a job! Banks, lenders, insurance companies, and yes, some employers are using credit information as a standard to make “informed” decisions. In today’s financial-driven world, creditworthiness defines a person and their financial accountability to the one dishing out the dough, aka banks. On a scale of bad to best, it can often be difficult to swallow this equivocal judgement of character based on one or two late payments. So, if your FICO score is less than perfect, what’s the best way to turn your bad credit around? Follow three simple tips to improve your credit score!
Pay bills on time and before creditors send updates. Making on-time payments is an obvious way to boost bad credit resulting from late or missed payments. However, it is important to note that it is not an overnight fix, as regular on-time payments alone, take time to reverse poor payment history. Creditors pay close attention to payment behavior. Typically, late or missed payments remain on your credit report for up to seven years! To adjust your credit utilization, monitor your credit report and note which day of the month creditors send out updates to credit bureaus. With this information, you can plan your payments a few days prior to the reporting date (while still paying on time). In doing so, creditors will report the lowest balance on each account.
Keep your first credit card. The credit system greatly rewards seasoned credit. By that we mean, maintaining an account with established credit history. Developing a chart-topping credit score requires patience, as building credit history takes time. So keep your first $500 credit card, instead of cancelling it. This in turn, will improve your credit history. Also, your credit score will report higher pending recent transactions as opposed to an inactive card. So, use it! Tip: use your first card for one specific thing, like gas, and pay it off every month and on time. If you have several old credit cards, remember to use them every few months to ensure that your credit score gets the most bang for its buck. Again, you will want to remember to pay off balances on time, as it can be easily overlooked with cards you do not use on a regular basis.
- Transfer debt across multiple credit cards. Utilization is key! Transferring debt across multiple credit cards can be your best friend when it comes to minimizing your debt to credit ratio, which should be under a 30% utilization. Maxed out credit cards reflect poorly on a credit report causing red flags that put you in a high risk category to lenders. If you have multiple credit cards with a little to no balance, it may be best to transfer across, as spreading balances out can greatly improve your credit score!