You’ve finally settled in to your new home after graduating college. You’re doing things you’ve never done before like negotiating rent and shopping for furniture. Ahh. It seems you’re finally done. Wrong! This is the real world now. You have to take care of yourself and that includes keeping your finances in check (and cooking your own food- mom isn’t going to do that anymore!). One of the biggest parts of maintaining your finances is keeping your credit score as high as possible. If you plan on taking out a mortgage or borrowing money in the future, your credit score can act as an obstacle or a helping hand. Lenders use your credit score to determine your creditworthiness. A higher score means a bigger loan for a lower interest rate! We’ve compiled 8 different ways to raise your credit score and save you money on interest.
- Constantly monitor to dispute any errors
I know I know, it’s tedious. But trust me, checking your credit score every now and then may seem annoying but your future self trying to get a loan will really appreciate it if you monitor your credit report. It’s bad enough to have a poor credit score- worse so if you find out it’s because of mistakes you didn’t even make. Creditors are not perfect and they can make mistakes that hurt your credit score like erroneously reporting a certain payment as late or miscalculating the number of credit card accounts you have open. Check your report at least once a month to spot any mistakes you see. Don’t be afraid to call them and have them fix it.
- Pay your credit card bills early
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You need to leave your procrastinating days behind you. Well, if we’re trying to be realistic how about you leave them behind when it comes to paying your bills on time. Paying your bills for the current month long before the due date makes it a lot less likely that you’re going to have an overdue payment blemish your credit score. Make it a habit to review all your bills on a certain day of the month and pay all of them if there are no mistakes. Also, a lot of creditors have an ambiguous way of reporting balances. They may be reporting balances before the end of month so it’s always a good idea to pay early if you are able to do so.
- Leave Paid Credit Card Accounts Open
If you pay your credit card balance early and decide to close your account, think twice before doing so. The way issuers determine your credit score is cryptic. Closing one of you credit card accounts can potentially hurt your credit score. Leaving a credit card account that you don’t plan on using will help your score by increasing the total amount of credit you have available to you. Lenders will frame the total amount of credit card debt against your credit limit. So if you leave an account with a $1000 credit limit open along with another account with a $1000 credit limit and your total credit card debt is $500, you’re using 25% of your total credit. If you close one of the accounts you don’t plan to use, you effectively end up using 50% of your total credit which can lead lenders to thinking you’re overextending yourself.
- Watch Out For Credit Card Balances
We’ve been taught that debt isn’t a good thing to have. But that doesn’t mean you should frantically attempt to erase any debt from your credit report. While nobody likes owing money, showing lenders that you’ve kept your promise to other borrowers reassures issuers and will boost your credit score. This so-called ‘good’ debt will show lenders a long history where you have paid off your debts in a timely manner. If they see that you’ve paid off your debts without a problem in the past, they will make sure that reflects in your credit score.
- Get Tax Liens Off Your Credit Report
One of the most common blemishes people have on their credit reports is a tax lien. If you fail to pay your taxes, the federal government will make sure they discourage you from doing it again by filing a tax lien against you. Unpaid tax liens can stay on your report indefinitely and raise serious eyebrows by lenders. If you can’t pay Uncle Sam why should they think you could pay off your other debts? Paying your taxes is a good way to get this pesky tax lien off your report, but, if you can’t pay in full for some reason, there are options available to you. If you meet certain qualifications set forth by the IRS you may be able to get the tax lien wiped off your credit report before paying in full. The process takes a few months and get result in score increases over 50 points.
- Make All Payments on Time
Another common way people hurt their credit scores is by making late payments. It’s hard to keep track of all the payments you need to make and in the chaos it’s easy to miss just one payment. But that one payment can do some real damage to your credit score. If you have trouble remembering when certain payments are due, consider setting up a reminder on your calendar or using an app that tracks all your due dates for you. If it’s a money problem, try to do as much as possible to pay off the minimum amount. While it’s always good practice to pay in full, making the minimum payment is the best alternative solution until you your financial situation improves.
- Request A Copy Of Your Credit Report
The data on your credit report is what lenders use to calculate your credit score. When you look over your credit score, notice any potential red flags for issuers. If you have a couple of maxed out credit cards, control your spending for the next few months and work diligently towards paying off your balances. If you see some late payments on there call your credit issuer and find out if they would be willing to wipe a few off your record. Overall, use your credit report as a guide as to how you can improve your credit score right now and in the future. If you notice a trend of late payments, ask yourself how you can improve upon that.