Your credit score is a crucial factor in determining your borrowing power and the interest rates you’ll be offered when applying for loans, mortgages, and credit cards. A high credit score can unlock better financial opportunities and save you money in the long run. If you’re looking to increase your credit score, these five tips can help set you on the right path.
- Check Your Credit Report for Errors and Dispute Them
Mistakes on your credit report can negatively impact your credit score. To ensure the accuracy of your report, obtain a copy from one of the major credit bureaus (Equifax, Experian, or TransUnion). Carefully review the report for any errors, such as incorrect personal information, accounts that aren’t yours, or late payments that were actually made on time.
If you find errors, dispute them with the credit bureau by submitting a written request and providing any supporting documentation. The bureau is required to investigate your dispute and correct any inaccuracies, which can lead to an increase in your credit score.
- Pay Your Bills on Time, Every Time
Your payment history accounts for approximately 35% of your credit score, making it the most significant factor. To increase your credit score, make a habit of paying your bills on time, every time. This includes credit cards, loans, utility bills, and any other financial obligations. Late or missed payments can severely damage your credit score and remain on your credit report for up to seven years.
To ensure timely payments, consider setting up automatic payments for your bills, or use reminders and calendar alerts to help you stay on track.
- Keep Your Credit Utilization Low
Credit utilization refers to the amount of credit you’re using compared to your total credit limit. It accounts for about 30% of your credit score, making it the second most significant factor. To increase your credit score, aim to keep your credit utilization under 30% at all times. This means that if your total credit limit is $10,000, you should aim to carry a balance of no more than $3,000 across all of your accounts.
There are a few ways to lower your credit utilization. First, try to pay off your credit card balances in full each month. If that’s not possible, at least make more than the minimum payment to reduce your balance. Additionally, you can request a credit limit increase from your credit card issuer, but be cautious not to use the increased limit as an excuse to overspend.
- Don’t Open Too Many New Accounts at Once
While having a diverse mix of credit accounts can positively impact your credit score, opening too many new accounts in a short period can do more harm than good. Each time you apply for credit, a hard inquiry is recorded on your credit report, which can temporarily lower your credit score. To avoid this, only apply for new credit when it’s truly necessary and spread out your applications over time.
- Get a Copy of Your Credit Score and Track Your Progress Over Time
Monitoring your credit score regularly can help you stay on top of your financial health and identify areas for improvement. Many banks and credit card companies offer free access to your credit score, and various online platforms also provide this service. By tracking your progress, you’ll be able to see the results of your efforts to increase your credit score and make any necessary adjustments along the way.
Improving your credit score requires patience and dedication, but the potential financial benefits make it well worth the effort. By following these tips and staying committed to responsible credit management, you can increase your credit score and unlock better borrowing opportunities.
If you’re looking to make a significant financial decision, such as applying for a mortgage or refinancing an existing loan, a higher credit score can make all the difference. Contact Axiom Mortgage Solutions today for personalized advice on how to improve your credit score and secure the best mortgage rates for your financial goals.