How to Improve Your Credit Score

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Having good credit is essential, not only for making big purchases like a vehicle or home, but it can help you pay for your education, and get a good job. Some employers will look at your credit score before they hire you as being financial responsibility often equates to responsibility in other areas of life.

So, you can see there is a lot of weight put on a credit score. If your credit isn’t so hot, this article shows you how to build it up. The good news: with a little perseverance it can be done!

Don’t Buy What You Can’t Afford

According to credit repair experts, too many people view credit cards as a way to buy something they can’t afford and then pay off over time when they do have the money. The problem with this logic is that interest rates pile up if you don’t pay off the balance every month, making the item more expensive than if you bought it outright. Crazy, right?

So:

One way to build good credit is only to buy what you can pay off when your statement arrives. If you can’t pay off the entire statement then consider paying off a large chunk.

Think of your credit card as a debit card and this should help you when making those impulse purchases.

Don’t Overuse Credit

We’ve all heard about people who max out their credit cards. This is a big ‘no-no’ and leads to a poor credit score, which can be hard to overcome. To make matters worse, most people who max out credit cards aren’t able to pay off the balance at the end of their billing period since the monthly payments will be quite high.

As mentioned above, interest tacked on every month makes paying off your debt that much more difficult. A good rule of thumb is to keep your credit balance below 30% of your limit. This makes up one of the largest portions of your credit score.

Don’t Get Too Many Cards At Once

It’s tempting to apply for as many credit cards as you can, especially when you’re young and excited by the financial “freedom” a credit card provides. Having all that purchasing power is a nice feeling, but can get you into trouble quickly if you aren’t careful.

A lot of credit is too tempting for some people, and the more you charge, the tougher it is to pay back. It’s all about that interest.

Also, too many credit checks from credit card companies negatively impact your credit score. While credit inquiries only account for 10% of your overall credit score, it’s still a stat to keep an eye on if you want the best credit score possible when applying for a loan.

A good rule to follow is to have one or two cards and use those responsibly for a few years until you develop good spending habits.

Remember to never close out a credit card as this can negatively impact your credit score too. Instead, pay off the balance and just keep it in a drawer.

Pay Balance At The End Of The Month

As mentioned before, proper use of credit is buying that which you can afford, and that means paying off your credit card bill every month or close to it. Don’t look at your credit card as a long-term loan; that’s a bad habit that will get you into trouble.

Lenders want to see good spending habits, and good practice is paying off your debts quickly and on-time.

Don’t Pay Late

One of the biggest ways to damage your credit rating is to make late payments. Payment history comprises 30% of your credit score, and it’s something lenders look at when deciding whether to extend credit or not.

So, to avoid tanking your credit score, and looking bad to lenders, make all of your payments on time.

Pay Debts Quickly As Possible

While carrying a balance isn’t advised, it’s not the end of the world if you’re in this boat. The key to not letting it impact your credit is to pay more than your minimum every single month. This will help you pay off the debt quickly so you aren’t hit with interest payments.

Building good credit isn’t difficult; it takes discipline and being responsible with money. Follow the above tips, and you’ll see your credit rating soar.

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