How can I improve my credit score?
Improving your credit score is a lot like getting into shape. You can try all the quick fixes with popping weight loss pills and drinking fit teas, but the only true way to lose the weight is to put in the work by eating healthy and working out. Improving your credit score is similar to weight loss in that it takes time to repair it and there is no easy quick fix. When creating a healthy lifestyle for yourself you think about nutrition and working out, when working on a healthy credit score you also have to consider some factors.
On Time Payments
Punctuality in the world of credit is key. Paying your bills on time is a HUGE factor in establishing a good credit score. Roughly 35% of your credit score is based off of your payment history. If you are regularly making late payments on your lines of credit, your score is going to suffer. It’s kind of like when you miss a workout regularly-it’s going to hinder your fitness progress in the long run. Additionally, unpaid parking tickets can have an effect on your credit score. You may think those pesky little parking tickets will just magically disappear, but they can actually show up on your credit report and can cause problems when applying for credit. Paying any and all bills on time is an easy way to boost your credit score!
Use Credit More
One of the best ways to repair a bad credit score is by using your credit more often. Sounds a little counterintuitive, right? When you think about it, credit is built upon your ability to use it and pay it back in a responsible manner. If you use it and pay it back on time, you are showing that you can properly manage your finances, which is what lenders are looking for. Keep in mind that you should never go over your credit limit and use less than 35% of your available credit. If you use a lot of your available credit, a lender could see you as a higher risk. You should continue to use your credit as long as you can pay it back but use it wisely.
Low Credit Card Balance
Having a low credit balance plays into using your credit more. Keeping a high balance on your lines of credit is not good. Maxing out your credit cards multiple months at a time and being unable to pay them off, will greatly affect your credit score. Credit bureaus compare the amount of credit you use and the amount of credit that is available to determine your score. Using less than 30-35% of your available credit is a good rule of thumb to follow to ensure that you don’t get seen as a high risk for lending.
Secured Credit Card
For someone that has not credit or a poor credit, it may be harder for them to get approved for a loan or credit card. Setting up a secured credit card is an amazing way for someone to build up their credit history. It can be used just like a regular credit card, but you pay the refundable deposit upfront. Over time, you will build up your credit and will develop good payment habits. You can then take those habits that you learned with the secured credit card and apply for an unsecured credit card!
Think of a mortgage broker like your own personal fitness coach for your credit score. A health and fitness coach will help give you ways to overcome plateaus in your health journey, and a mortgage broker will help your credit score in a similar way. If you’re worried about your credit score and would like some help getting it back in shape, give us a call at 506-854-6847 or get in touch with us here.