When it comes to your financial health, your credit score can speak volumes about how responsible you are with money. A low score can stand in the way of achieving your financial goals and make it more expensive to borrow money.
Raising a low score isn’t difficult and it doesn’t have to be time-consuming either. With the right strategy, it’s possible to earn a better credit rating with minimal stress. Here’s how to make a positive change in your score in just a few months.
Know where you’re starting from
Credit scores operate on a range, typically from 300 to 850, and there’s a big difference between a poor score and excellent one. So what is an excellent credit score? Generally, it’s anything over 720.
If you don’t know what your score is, considering getting your free credit score instantly with Credit Sesame. Seeing your score in black and white can give you an idea of how much distance you need to make up to get into excellent credit territory.
Check your credit habits
How you handle your finances and your credit can have a big impact on your credit score. For example, do you always pay your bills on time? If not, that can be devastating to your credit. Carrying high balances on your credit cards can also hurt your score if you’re close to or at your credit limits. Opening new credit accounts frequently or closing old accounts can also drag your score down.
Reconsidering how you use credit and knowing what habits can work against can help you change your approach. For instance, a relatively quick way to improve your score is to lower your credit utilization ratio. This is how much of your available credit you’re using.
There are a couple of ways to do this, starting with paying down some of your debt. If you can afford to pay off one of your credit card balances, for instance, you could see a difference in your score almost right away. The other option is to raise your total credit limit. You can do that by requesting a credit limit increase on some of your cards, or opening a brand new credit card account.
One thing to note, though. Applying for new credit can ding your score by a few points. Before you try to open a new account, check to see if a credit limit increase is a possibility first. And of course, don’t make any new charges against your higher limit and work on paying down your existing debt.
Considering making good on collection accounts
Collection accounts can be hard on your score and they can stay on your credit for up to seven years. If, however, you have any medical collections on your credit, paying those off could help your score. Under new scoring models, these debts are factored into your score calculation. Clearing the decks on unpaid medical bills could give your score a fast boost.
Don’t close down old accounts
You may think that you can raise your score quickly by unloading credit accounts you don’t use. Actually, this can work against you. The best course if you want to improve your credit is to keep all your accounts open, lower your balances and pay your bills on time. That can yield the biggest positive difference in your score over the short and long-term.