Let’s face it, everyone wants excellent credit, but not everyone has it. It can be challenging to tell whether you have good, bad, or mediocre credit until you apply for something and get a reply saying no. If you have fair or poor credit, that doesn’t mean you won’t ever have good credit again. You might not have an excellent FICO score right now because of natural ups and downs in your financial situation and irresponsible past decisions. But you can improve your credit score with time and focus on fixing those issues. Stay focused, develop a plan, and achieve it one day too.
Keep Old Accounts and Cards
If you had a credit card or loan that you paid off years ago, it’s actually going to help your credit score. It’s called “length of credit history,” accounting for 15% of your credit score. That’s why one of the best ways to improve your credit score is to keep old accounts and cards open. Make sure you’re paying that monthly bill on time so it doesn’t negatively affect your credit score.
Keep Track of Credit Cards and Loans
Credit bureaus want to know that you’re managing your loans and credit cards responsibly. One way to show them this is by keeping track of your credit card balances and loan payments. You can set up automatic payments with your bank’s website. If you have a loan or credit card account that you’ve been paying on for a long time, that’s also a plus for your credit score. It helps boost your credit score because the length of your credit history accounts for 15% of the score.
Pay Bills on Time
It’s wise to pay your bills on time, but it’s also important to pay what you owe. Your credit score is based on information in your credit report, which includes details about loans, credit cards, and utility bills. For example, if you have a car loan, a mortgage, or student loans, they’re all factored into your credit score. If you don’t pay those off, they show up as delinquent on your credit report and can even lower your credit score. That’s why it’s essential to make sure to pay what you owe.
Avoid Using More Than 30% of Your Available Credit.
Credit utilization accounts for 30% of your credit score, and it’s helpful to know that it’s the hardest factor to change. One way to keep it low is to avoid using more than 30% of your available credit. So if you have a credit card with a $15,000 limit, don’t use more than $5,000 of it. With low credit utilization, you’re showing credit bureaus that you’re responsible for your credit and that you’ll pay your bills. Still, it’s best not to use more than 30% of your available credit because it can make it harder to pay off the debt.
Don’t Apply for New Credit Without a Good Reason
If you have fair or poor credit, you may have had to choose not to open new credit accounts. Credit bureaus know this, and that can actually help your credit score as long as you don’t start opening new accounts for no reason. But remember, if you need to open a new account for a good reason, like getting an auto loan or financing for a business, don’t hesitate. Your credit score will be lower if you don’t have any other credit accounts or recent loan applications. However, if you have bad credit and have to open a new account, be ready for a lower credit limit and interest rate.
Conclusion
Being responsible for credit and debt is the key to a high credit score. This means paying your bills on time and keeping your debt usage low. If you have great credit, you’ll have access to better interest rates and lower payments on car loans, mortgages, and other forms of debt. If you have excellent credit, your credit score is likely above 800. Great credit is a great asset, as it will make getting approved for loans and credit cards much more accessible. With a bit of work, anyone can have excellent credit.
