Are your credit scores in need of a makeover? Attempting to better your credit scores is a positive step. Unfortunately, it may not always to be possible to see immediate results.
Your credit scores are the direct result of how you have managed your debts over time, and are compiled through calculations that consider the information found in your credit report. Your FICO® Score☉ powered by Experian shows you the type of information that banks and lenders see. FICO® Scores are used in 90% of credit decisions.
Ready to see how your credit behaviors stack up? If caring for your credit hasn't been much of a priority recently, consider each of these six options:
- Pay your bills on time. Your payment history may be reported to the credit bureaus. Delinquent payments are one of the most important factors on your credit report that are considered in many credit scoring models. If you don't pay your bills on time, your credit scores will suffer.
- Keep your credit card balances low. A high debt-to-credit ratio (utilization rate) is a sign that you are overextending your use of credit and could be facing financial difficulty.
- Open new accounts only as needed. If you plan to open a new credit account for additional spending power or even to attain a better credit mix, be careful. Opening new credit accounts adds hard inquires to your report and could ultimately result in more debt than you can afford to repay, both of which could negatively impact your credit.
- Pay off excessive credit card debt. Paying off debt is one way to reduce your debt-to-credit ratio. This can have a positive result on your credit. On the other hand, if you close unused accounts, it could lower your credit scores because you lose the credit available on those accounts, making your credit balances a greater percentage of your available limits.
- Check your credit report regularly. Your credit scores begin with your credit report. The information in your credit report is used to calculate your credit scores. Checking it often can help ensure the information is being reportedly correctly to the credit bureaus. Check to make sure that the amounts owed and your payment history are correctly listed. If any errors are found, you can dispute them with the credit reporting agency.
- Guard against identity theft. Fraud and identity theft can ruin your reputation as a reliable borrower. Scan your report often to check for suspicious activity that you don't recognize.
It takes time to improve your credit. But time can be your ally. Being caught in a credit crunch does not make you irresponsible. If your personal circumstances make it difficult to pay your bills on time, communicate with your creditors. Your creditors may be willing to work with you to find a solution. Habits are hard to break. So make financial responsibility a good habit—one that can save you money in the long run.