How to Get Better Credit
Want to buy a car with 0% APR? Wish to refinance your mortgage at a lower rate? Need a credit card for emergencies? Looking to rent?
You can do all that with a great credit score. According to Good Housekeeping, there used to be a time when a score of 620 could get you a sensible mortgage rate. Today you might need 750+ to get a great rate like 5.6% APR.
While the era of easy credit may be over, there are many common sense ways to raise your credit score.
1. Don’t be late. Did you know late payments have the greatest negative impact on your score? It’s true. There are people with $20,000 in credit card debt and a score of 700, how do they do it? By always making at least the minimum monthly payment. In fact, making that minimum payment is not only good for your score, it’s also good for your wallet! Late payments can punish you with penalty fees and higher interest rates. So to save the maximum, pay the minimum.
2. Don’t max out your credit cards. Thirty percent of your credit score is evaluated from your total balances. Why? Because overextended people are sometimes unable to pay or they end up making late payments. On occasion, a payday loan can be cheaper than credit card late fees.
3. Longer is better. Fifteen percent of your score is based on the length of time you have had credit. So if you don’t have a credit card, the time to get one is now! Consider this list of credit cards for bad or no credit.
4. Too many cards can crash your credit. More credit cards means more potential credit for you to use—a great temptation for people who haven’t been using credit cards for a very long time. When credit checkers see you have multiple requests for credit, they get the impression that you might have a cash flow problem or that other lenders are rejecting you. Besides, to get the most benefits from credit cards, you’re better off using one or two, or at most, three.
5. Fix mistakes in your credit report. People make mistakes, and so do credit reporting agencies. Bankrate.com reports that up to 80% of reports have at least one error. The good news is that you can get a free credit report ever year at annualcreditreport.com. You might also want to check out Equifax, they offer a score watch for around $12.95 per month.
In conclusion, while improving your credit score won’t happen overnight, it can happen over time. As long as you are persistent in making those minimum monthly payments, paying your debts, controlling your spending, and not opening too many credit card accounts, you will achieve the higher score that opens the door to new financial opportunities and greater financial freedom.
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