I recently received the following question from a reader, Erin:
I wonder if you have any tips or advice for someone (well, me!) who wants to increase their credit score. I have heard about secured credit cards. Do you think they are a good idea or do you know if they increase scores as much as they say?
We are currently renting, paying off debt and working towards good-standing so we can be approved for a mortgage at a reasonable interest rate. Any advice or info you may have would be much appreciated.
Increasing your credit score is no easy feat, but it is certainly doable and something that I think everyone should be working towards (if you already have a great credit score, work on maintaining it).
As for secured credit cards… honestly, I don’t think they’re the way to go. Create a budget and learn to live within your means. You don’t need a special credit card to tell you what your limits are – YOU should know them and avoid going over them.
If you want to increase your credit score, you need to realize that it will take time. Unfortunately, this is not something that you can accomplish overnight. However, with work and dedication, you can absolutely increase your credit score – and it’s really very simple to do.
Following are 4 ways you can increase your credit score.
1. Always pay your bills on time.
Paying your bills on time shows your creditors that you are making the right moves in ensuring that they will get their money back. They like that. Late or outstanding payments can destroy your credit. Even worse, if you have a bill that goes into collections, that will stay on your record for 7 years – so try to avoid collections at all costs!
The easiest way to remember to pay your bills on time is to set up a simple bill paying method every 2 weeks. Schedule a reminder into your phone, calendar or wherever you keep your important dates and make sure you get those bills paid when they’re supposed to be paid.
2. Reduce your credit applications.
Every single time you apply for a new credit card, a home, a car – or anything that has credit attached to it, it’s possible that you are paying a big price. You can negatively affect your credit score if you have a bunch of lenders asking about your credit in a short period of time – so avoid applying for new credit if you really don’t need it.
Only apply for credit when you absolutely need to do so. If you don’t need to, then don’t take the risk of hurting your credit score.
3. Check your credit history.
It’s very important to check your credit history at least every 6 months (3 months would be ideal) to make sure that there is no incorrect information listed that could be affecting your credit score in a negative way.
4. Don’t go over your credit limit.
Going over your credit limit can have some serious financial implications, including a fee for going over your limit (thus adding to your debt), and your interest rates could possibly skyrocket (again, adding to your debt).
If you can, try to keep your balance well below your actual credit limit. The higher your balance, the more of an impact it has on your credit.
Increasing your credit score is not a difficult task, but it is a task that you should definitely not take lightly. Maintaining a good credit score is crucial for your future. If you ever want to buy a home, a car – or anything of significant value, you are going to need to have a high credit score to get lenders to agree to loaning you money.
Pay off your debt as soon as possible and follow the 4 tips above to ensure your credit score is a good one.
Do you have any tips for increasing your credit score?