Understanding your credit profile can be daunting. From credit cards to mortgages and other loans, there’s a lot of fine print and jargon to wade through, especially when it comes to payments, fines and interest rates. However, there is one common reference for banks and other lending institutions when it comes to rating your credit worthiness, and that’s your credit score.
While the majority of Americans, approximately 80 percent, know the basics about credit scores, just 60 percent have checked their credit report in the past year. And even fewer Americans have taken action to improve their credit score. Many people don’t know how to check their score or don’t believe that they have control over their credit profile.
[See: 12 Habits to Help You Take Control of Your Credit.]
There is no silver bullet when it comes to improving your credit score. The three primary credit bureaus — Equifax, Experian and TransUnion — all look at a combination of factors when determining your score, which is primarily driven by your payment history, outstanding debt and available credit. How long you’ve been using credit is also a factor. While an all-cash lifestyle may be enviable, it can have negative consequences when it comes to your credit score. So, the message, particularly for millennials who are just starting out, is to begin using credit wisely early on.
Check out these tips to help build and maintain your credit score in 2017.
1. Build your credit. To establish credit for the first time, get a secured credit card or one with a lower limit and only charge what you can afford to pay off in full each month. Make payments on time to establish good credit. But if you’re in a pinch, don’t overdraw your account, just to pay on time. Consider paying the minimum, or whatever you can afford, by the due date and pay off the rest after your next payday to zero out the balance. Regardless of whether you’re just out of college or nearing retirement, on-time bill payment is key to improving your credit score.
2. Know your credit score. Numerous online resources offer consumers free access to their credit score, and in many cases, it is helpful to review it side-by-side with your daily finances, particularly if your goal is to see that number increase over time. In general, potential lenders like a credit score of 700 or higher.
[See: 12 Simple Ways to Raise Your Credit Score.]
3. Review your credit report. Knowing your credit score is the first step, and taking time to review the findings in your credit report is the next. Check out your free credit report, available online from www.annualcreditreport.com. Ideally, you would pull your credit report from each bureau once per year. Some people take the time to review and compare all three at once (you might be surprised to find discrepancies between them). Others spread it out (one every four months) as a way to make sure that any inaccuracies haven’t cropped up partway through the year.
4. Report inaccuracies. Did you see a bill that you’re certain is paid in full, but is still listed as outstanding on your credit report? Reach out to the creditor to clarify the discrepancy. Did you spot a request for your credit that you didn’t make, such as an application for a new credit card? This type of activity on your credit report can point to potential fraud or identity theft. Again, contact the creditor to better understand the source of the request and refute any fraudulent activity.
5. Manage your credit history. Just paid off that credit card after the holidays? Congratulations. But don’t rush to close the line of credit as your credit history and debt-to-credit ratio remain key considerations for the credit bureaus. Let’s say that you have two credit cards with a $1,000 limit — one that is nearly maxed out and the other that is paid off. If you close one, your debt-to-credit ratio will be much higher, so maintaining good credit with room to spend is important.
[See: What to Do If You’ve Fallen (Way) Behind on Your Credit Card Payments.]
6. Avoid needless requests for credit. Tempted by a recent credit card promotion or curious about whether you’d get that credit card and at what rate? Don’t apply unless you really need it. Repeated requests for your credit can also negatively impact your credit score, particularly if you’re planning to finance a house or a car in the not-too-distant future.
Whether you’re applying for a mortgage or simply setting up cable or other utilities, your credit score is one of the most important barometers of your financial health. So, manage it with care and know that you do have an active role to play in the information that is received by both the credit bureaus and prospective lenders.
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6 Tips to Raise Your Credit Score in 2017 originally appeared on usnews.com
