Tips to improve your credit score
The average credit score in the U.S. is 715
(InvestigateTV) — According to the Consumer Financial Protection Bureau (CFPB), a credit score is basically a prediction of how likely a consumer is to pay back money loaned to them and is used to qualify consumers for things like a credit card, mortgage, or car loan.
A credit score can also be used to calculate insurance rates, apartment rentals and job screenings.
Nathan Grant, a senior finance industry analyst with MoneyTips, said there are ways to increase credit scores. One is payment history. That means making consistent, on-time payments over time and not missing any. Even a single late payment can remain on a credit report for up to seven years.
“I recommend setting up automatic payments for at least the minimums,” Grant suggested. “And then when you have more money in your budget, you know that you can apply, probably should focus on the highest interest debt too, but by setting up those automatic payments, you’re going to avoid that late payment, which will be extremely damaging.”
He said once you pay off a balance, don’t close the account.
“Even though if you’ve been paying something down for a while and you’re like, it’s tempting. Like, I just want to get rid of this card. I don’t want to,” Grant said. “Is it better to just shred or put it in your dresser drawer, keep it open unless you’re paying like a really expensive annual fee to keep it open? Because that relates to the other top factor when it comes to your credit score and that is your amounts owed. And particularly, that’s important versus your overall available credit. They call that your credit utilization.”
Credit Utilization is the percentage of overall credit being used.
Grant said those that have a credit card in good standing that they responsibly pay down could also request a credit line increase – that automatically lowers the credit utilization ratio, and leads to an increase in overall credit score.
He said the key is that they don’t pile on debt on the card with the bigger credit line. They should keep paying it off in full after using it.
MoneyTips has further advice for raising credit scores here.
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