Your credit score and credit report may not be something you think about often, but the fact is, when it does come time to need your credit score, it really does matter. Your credit score and report is a reflection all of your past credit history. A credit card company or someone looking to give you a loan, wants to know how much credit you have, what is the ratio of debt to credit, do you make your payments on time, and how much other accounts do you have.
Why Your Credit Score is Important
A good credit score is important if you want to get a new credit card. Not only does it determine if you are approved or not, but it can also determine your available credit limit and interest rate. Credit scores also play a vital role if you are taking out a mortgage to buy a house, taking out a loan to pay for college tuition, to buy a car, or start a business. Even things like signing up for a new phone plan may require a credit history check. When you are signing a lease to an apartment, you may be subjected to a credit check as well since landlords want to be sure you’ll be paying rent on time. If your score isn’t good, you can be turned down or asked to pay a higher security deposit or additional fees to ensure payment.
Even in some careers, future employers may, with your knowledge, want to know your credit score or credit history. This is especially true if your position requires you dealing with money. But some employers just want to know how responsible and diligent you are with paying your bills and paying them on time.
How to Improve Your Credit Score
Now that you realize just how important your credit score is, you’ll want to start taking steps to improving it, or if it’s already good, keeping it that way. Keep in mind that if you have a weak credit score or a troubled credit report, you can’t fix it overnight. It takes patience and a lot of hard work. Here’s how to improve your credit report:
- Check your report.
Whether you think you have excellent credit or a less desirable credit report, be sure to check your credit report. This will allow you to see any errors or any suspicious activity associated with your credit. You could have paid something on time but it came up as a late payment or opened an account a while ago and forgot all about it. This is also a great way to check if you’ve had a problem with identity theft. If there are any accounts you don’t recognize, you’ll want to report them immediately to the credit bureau. You can check your report for free by visiting AnnualCreditReport.com. It’s free to see your credit report, but you’ll have to pay a small fee to see your actual score.
- Get organized with your bills.
It’s pretty easy to get disorganized with bills. For me, I have a lot of bills. Some I pay online, others I write a check for, and others are direct withdrawal. Some are due at the end of the month, and some at the beginning. Since late payments are horrible for your credit score, you need to pay your bills on time. Late payments are flagged on your credit report and cause your score to go down. It can also cause your interest rate to go up and late payments added to your bill. On the other hand, making your payments on time, will start to improve your score. Keep track of when your bills are due. The same way you mark on your calendar doctor’s appointments and items due for work or school, mark down when your bill is due. Some company’s offer customers to enroll in reminders that will be e-mailed to you when your bill is almost due.
- Consider automatic payments.
Since making your payments on time is crucial to improving your credit score, consider signing up for your monthly payment to be automatically withdrawn from your checking account. This is a solid action to ensure you won’t be late. Some companies, like U.S. Cellular, may even offer you a small discount for enrolling. If you’ve been trying to deal with your student loans, some lenders, like Sallie Mae, will lower your interest rate if you qualify and sign up for automatic debit. But you have to be sure you always have enough money to cover any bills since it could then result in late payments plus overdraft fees. Also, keep track of your checking account because you might forget about payments deducted and then end up overdrafting.
- Make a payment plan for your debt.
If you’re struggling with debt and also dealing with a less desirable credit report, it can feel overwhelming. But it is possible to deal with it and come out on top. Make a plan of paying off any debt you have as well as any accounts that are past due. Your plan may have to include finding ways to save money in your monthly budget so you can put it towards bills and/or debt payments. There are ways you can save money on food, try to make more careful choices about purchasing wants over needs, and try to lower your utilities.
- Work with anything you have past due.
If you have an account that is past due, the worst thing you can do is just ignore it. Call the company, and face it. It is possible that they will work with you to go on a payment plan. For student loans, it is possible you can defer your payments if you are unemployed, still in school, or experiencing economic hardship. You can also put your loans in forbearance, which means you pay a fee, then you do not have to make a payment for a certain amount of months without any penalties.
Do you check your credit report every year? How do you try to improve your credit score?