Believe it or not, your credit score has a huge impact on your daily life. While it typically shows its face when it’s time to buy a home or a car, or when you want a great rate on that store credit card, it’s quickly sneaking into other aspects of our life. For instance, did you know your credit score could also impact your ability to land a job?
While Credit Karma reminds us that the credit bureaus send over a variation of your credit report meant specifically for employers, it’s a great example of how your credit score can impact you in ways you may not have thought of. What are they looking for? Well, they’re trying to reduce their risk. They are looking for a history of negative public records or other derogatory marks that could indicate a certain level of untrustworthiness.
Kelly at the Centsible Life, a self-proclaimed “debt slayer,” has a great post about how credit can impact your job search and other aspects of your life, and also offers some tips on how to check and monitor your report.
Now that you understand the importance of your credit score (as if you didn’t prior to this blog), let’s take a look at some of the top credit-boosting tactics you should have started yesterday! There is never a better than the present to begin incorporating these into your financial strategy.
1. First things first: monitor your credit and go over it closely for any discrepancies or errors.
In a recent FTC study, it was found that 5 percent of all current credit reports contain some form of error, which can lead to borrowers paying much more than necessary for big-ticket items, such as a house or a car. While that may not sound like a lot, that translates to literally millions of credit reports that contain at least one error. Sounds a little different when you put it that way, doesn’t it?
US News lists the 3 most common errors on credit reports, which will give you a great idea of where to start looking on your own report. If you happen to find a discrepancy or an error, follow these steps via My FICO to report and correct errors.
2. Gather all of your current credit cards and statements. Figure out which ones have lower balances, and come up with a strategy to pay them off.
Paying off high-interest rate credit cards looks good to the credit bureaus, which will, in turn, reflect on your credit score. You may think that it would be a good idea to close the accounts after you pay them off; however, this strategy actually proves to be counterproductive. We will explain this in more detail later.
Once you have paid off your balances, use one card for most of your necessary purchases. However, be sure to occasionally use your other cards and then pay them off -- if you let your accounts sit inactive for too long, you run the risk of your creditors closing your accounts. Again, more on this later.
David Weliver and the team at Money Under 30 have a fantastic blog post with step-by-step instructions on how to improve your score, many of which work hand-in-hand with the tips we’re offering you today.
3. Lower your overall debt to available credit ratio.
This is one of the bigger factors in determining your credit score, and you should aim to have your debt to total available credit ratio as attractive as possible. This shows lenders that you know how to manage credit and that you are financially responsible. If you’re unsure how to calculate your Credit Utilization Ratio, the Nerd Wallet offers some great advice. They also dive into the difference between your Credit Utilization Ratio and your Debt-to-Income Ratio – another important ratio that you should be keeping an eye on.
Another way to see positive change in these ratios is to ask your credit card companies for a credit increase. Even without paying off any of your balances, this will automatically lower your overall debt to credit ratio, improving your credit score. You can find tips on ways to increase your credit limit in this blog by Money & Career CheatSheet.
4. Leave your good (old) debt alone.
Another big factor in determining your overall credit score is your credit history. A long history of responsible and successful credit is key to a good score. In other words, that first credit card that you got in college and used to buy more than just textbooks? Leave it in your wallet. The Simple Dollar takes a more in-depth look at when you should and shouldn’t keep your old credit open.
5. Don’t Forget What Your Mom and Dad Taught You!
Of course, as with so many things, your credit score always comes back to the basics. The three biggest factors that go into your credit score, and account for a full 80 percent of determining your score, are your payment history (35 percent), how much debt you have (30 percent), and the length of credit history (15 percent). Formulate and execute a plan to reduce the amount of debt you owe, and be consistent and mindful with the payments that you make. Our Anatomy of a Great FICO Score blog will give you an inside look at what each of these categories takes into consideration.
If you have trouble remembering to make your payments, and you are constantly finding due dates passing you by unremembered, then try to think outside of the box. Mint Quickview, Daily Cost, and Venmo are just a few of the apps you can download to keep all of your expenses and payments tracked in one place according to Business Insider.
At Lenda, we pride ourselves on offering home refinancing made easy. We allow you to refinance your home loan online, with our simple and secure process. The process is simple: get your custom quote, submit your application, verify and submit all of your required documentation, and then close your loan. But that’s not all - our clients also save thousands of dollars in closing costs and enjoy a short closing time.
We offer complete transparency and lower costs, we are faster than traditional lenders, and our clients appreciate our policy of no sales calls or telemarketing. But don’t just take our word for it - here is an article from the Mortgage Bankers Association to back us up.
Get your custom quote online in less than a minute!