One of the first things people start to tell you when you become an adult is that you should keep an eye on your credit score. The sad thing is that most of us don’t pay much attention to our credit scores until we realize there’s a problem. Solving credit score problems can be really difficult because a credit score is a very complicated calculation that takes several variables into account to produce a score.
According to Experian, the average American FICO® score is 703, which is considered a “good” score. If you’re not sure what your credit score is, you can request a free credit report from any of the major credit reporting agencies, or through any number of apps or financial services. Knowing your score is a great place to start if you want to raise your credit score.
When you look at your credit report, check it for errors. Are there accounts listed you don’t recognize? Are payment and debt amounts incorrect? Is your payment history being reported correctly? You will want to have any errors in your report corrected immediately to ensure your score is as high as it should be.
The first thing you can do to begin improving your credit score is to pay your bills on time. Many people underestimate the importance of this simple step, but payment history is actually the largest percentage of how your credit score is calculated. If you haven’t been making your payments on time, your score is never going to be as good as it could be. Concentrate on making minimum payments on time to keep your credit score in tip-top shape.
Next, start paying down high balances or debt. Debt-to-income is a ration often discussed in credit terms, and this is very important, but so is the percentage of available credit that you’re using. You need to keep your debt on the low side if you want to have access to most credit products. The key here is to try not to max out your accounts or utilize too much of the credit you have available, that’s something that can concern creditors as it could be a sign that you’re being overwhelmed by debt. This is not to say you shouldn’t use your credit accounts—you should. Using them, and even keeping manageable balances shouldn’t hurt your credit score.
Don’t think that closing credit cards will necessarily help your score. Because of the way scores are calculated, closing an account can actually hurt your score. So think carefully before closing a credit card.
The best advice for raising your credit score is to keep an eye on it. Consider setting up a credit monitoring system that can notify you of any sudden changes so you can course-correct quickly if your score takes an unexpected dip. Keep your credit score in tip-top shape so you’ll have a better chance to access the credit you need when you need it!