4 Tips to Transform Your Credit Score

Like it or not, your credit score is one of the most important metrics when it comes to determining your overall financial health. The better your score, the easier the process for everything from your borrowing power to rent or mortgage approvals. On the other hand, the lower your score, the higher the challenge (and interest rates). 

While fluctuating credit scores are common, sudden dips can seem like they happen at random, especially if you don’t fully understand what impacts your score. When that’s the case, growing your score from fair to excellent can feel like an uphill battle. 

Thankfully, with a few tried and true strategies recommended by the pros here at Finance Opinion, you can improve your score within a few months (or less!). Read on as we outline tips to level up your credit score — and keep it that way. 

Always pay on time.

The number one scoring factor in your FICO and Vantage Credit Scores are measured by timely monthly payments. As many on the Finance Opinion Team can attest, one late or missed payment has the ability to stay on your credit report for up to 7 ½ years! Steer clear of that seven year penalty by making it a priority to pay your debts on time (or even early) every month.

To help stay on track, the Finance Opinion writers suggest setting up autopay for your bills, or a recurring monthly calendar reminder in your phone for due dates so you never miss a payment.

Monitor Your Credit Utilization Ratio

 

Credit card utilization means how much of your available credit you use at any given time. We (and other finance experts) recommend keeping that percentage below 30% to avoid a hit to your credit score.

As an example, let’s say you have two credit cards – one with a spending limit of $4,000 and an owed balance of $2,000, and one with a spending limit of $1,000 with $0 owed. To determine your credit utilization ratio, add up your total credit available ($4,000 + $1,000 = $5,000) and the total amount you owe ($2,000 + $0 = $2,000). 

 

To determine your ratio, divide the amount you owe from the total credit available to get your credit utilization ratio, which in this case, would be $2,000 divided by $5,000 = 40% – well over the recommended max. 

To boost your score, consider accelerating your debt payoff through the Avalanche or Snowball methods to bring down your balance and give you a healthier ratio, thus boosting your overall score. 

Keep Old Accounts Open

Your overall “age of credit” on your credit score – ie: how long you’ve had credit accounts open – plays a role in your overall score. So while it may seem counterintuitive to keep inactive credit accounts open, closing them can actually be even more detrimental. If one of your financial goals is to grow your score, keep all credit accounts open to avoid a drop in numbers.

Check Your Reports Regularly

Keep a close eye on your credit reports and monitor them for any inaccuracies. If you see something unusual, you can dispute the error by reporting it to Experian, Equifax, and/or Transunion to get it removed from your credit report (and save a few points on your score).

If you need to dispute an item on your credit report, the folks at ConsumerFinance.gov have put together a helpful checklist with templates, guides, and instructions for doing so to help you avoid a wrongful, long-term hit to your Credit Score. 

Remember, while improving your credit score is a great goal to have, it’s not one that will deliver overnight results. However, with consistency, and a bit of strategy as outlined by our team, you can begin to see results in the form of a growing credit score anywhere from several weeks to a few months later. 

The first hurdle is getting started, and the sooner you start, the sooner you’ll see results. You’ve got this!

 

LEGAL DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, we advise you to consult with a licensed advisor.