Having a decent credit score is important because it is a major determiner in whether lendings extend loans to you for big purchases. If you want to buy a house or a vehicle, you must have a good credit score to qualify for financing. Unfortunately, many people have far-from-perfect credit scores because they have made past financial mistakes. Thankfully, it is never too late to take action to boost your credit score. Use these three tips to get started.
- Make a Plan
You can’t raise your credit card if you don’t have a financial plan. One of the largest factors in your credit score is the amount of debt you owe, so it’s important to add it all up so you have a concrete goal to pay off. It’s also a good idea to understand your FICO score vs credit score so you can make a plan to improve it.
- Pay Down Debt
Decreasing the amount of debt you owe is the best way to raise your credit score. While you want to maintain a good debt-to-credit ratio to maintain a decent credit score, having too much debt per line of credit always has a negative impact on your score.
Paying down debt often seems impossible, but it helps to break the debt down into manageable chunks. Choose the credit card with the smallest balance and work on paying it off. You should set a monthly budget to limit spending and put however much money you can spare on your monthly credit card payment. Once that card is paid off, focus on the one with the next lowest balance.
- Keep Credit Cards Open
It’s tempting to close lines of credit when you pay them off so that you don’t rack up debt again. However, this habit lowers your available credit which usually raises your debt-to-credit ratio. It’s best to leave lines of credit open and use your cards occasionally to maintain a good credit score. This requires you to change your spending habits to keep from spiraling into debt again once your credit cards have been paid off.
You need a good credit score if you want to make any type of big purchase. Financial mistakes in your past may have lowered your credit score, but you can take control of your finances at any time. Using these three tips can help you raise your credit score and enrich your future.