Having a strong credit history and score can open many doors, from getting approved for loans to securing rental apartments. Yet building a strong credit history takes time, dedication, and responsible financial behavior. Here are some steps to help you improve your credit score.
1. Check your credit report
The first step towards building a strong credit history is to know where you stand. Obtain your credit report from any of the three major credit bureaus – Equifax, Experian, and TransUnion. Review your report for errors and discrepancies that could affect your score. Correct any errors on your report as soon as possible.
2. Establish credit
If you’re new to credit, start by opening a credit card or taking out a small loan. Even if you don’t plan on using your credit card regularly, having one and paying the balance in full every month can establish a credit history. You can also consider becoming an authorized user on a relative’s credit card, which can help you establish credit history.
3. Pay bills on time
One of the most important factors in building a strong credit history is to pay your bills on time. Late payments can seriously damage your credit score. Set up reminders so that you don’t forget to pay your bills on time. Consider setting up autopay so that your payments are automatically deducted from your bank account every month.
4. Keep balances low
Your credit utilization ratio, which is the amount of credit you have used, compared to the total credit available to you, accounts for 30% of your credit score. Keeping your balances low, below 30% of your credit limit, can help improve your credit score. Paying off balances in full every month can keep your balances low.
5. Build a mix of credit
Having a mix of credit types, such as installment loans, revolving credit lines, and mortgages, can help improve your credit score. However, don’t take out new credit just for the sake of adding a new type of credit to your file. Only open new credit accounts if you need them and can manage them responsibly.
6. Don’t close accounts
Closing a credit account can negatively impact your credit score, especially if it has a long credit history or a high credit limit. Instead of closing accounts, consider keeping them open and using them occasionally to maintain a strong credit history.
7. Hire credit repair professionals
If you are struggling with credit repair on your own, consider seeking help from credit repair professionals. Credit repair companies can help you with disputing errors on your report, negotiating with lenders, and improving your credit score. Be sure to research credit repair companies carefully before you hire them.
Improving your credit score takes time and effort. However, by consistently practicing responsible financial behavior, you can build a strong credit history. Remember to check your credit report regularly and to establish credit and make payments on time. Over time, these efforts can help you achieve your financial goals and live a more secure and stable life.