Your credit score is the single most significant number you should know when it comes to personal money. With a good credit score, you can get better terms and prices on loans and credit cards than you would with a bad credit score. Get Smart About Credit Day is October 21, and there's no better time to start thinking about how you might improve your credit score than now.
“While the unexpected can often derail our financial goals, a strong credit score can be easy to build if you exercise financial discipline,” said Eric Busch, Mortgage Loan Officer at BANK. “As long as you don’t make decisions that cause you to get overextended, building an excellent credit history can be done simply by making responsible financial decisions.”
A credit score of 750 or more is great, although a score of 700 or higher is still regarded good. You generally don't want your rating to drop below 700. A credit score is determined by five basic elements. Some have a greater influence than others, but each factor is considered when determining a person's ability to repay a loan.
Payment history — The quickest approach to improve your credit score is to pay your bills on time.
Credit utilization —Your credit score will suffer if you max out your credit cards or carry huge balances on a regular basis.
Length of credit history — The longer you keep an open credit account, the better your credit score will be.
Number of accounts or inquiries — A high number of credit queries will lower your credit score. Only apply for the positions those that you require.
Credit mix — Having a variety of credit accounts, such as a mortgage, vehicle loan, school loan, and credit cards, demonstrates that you can handle various sorts of loans and can improve your credit score.
Tips for Improving Your Credit Score
Building and maintaining a good credit score necessitates planning and the determination to live within your means. The actions below will help you get your score moving in the correct direction.
Pay bills on time — Your credit score is determined in part by your payment history, which accounts for 35% of your total score. Set up automatic payments on your accounts to avoid missing payments and to establish a habit of paying bills on time.
Make multiple payments each month — Your credit score is determined by 30% of your credit use. Consider making many little payments each month to lower the amount of credit you're utilizing if your balances on particular accounts are too high.
Keep credit card balances low — Just because your credit card has a $20,000 limit doesn't mean you should use it all. Maintain a credit usage rate of less than 30%. This will signal to lenders that you are a risk-free borrower.
Check your credit report each year — Visit www.annualcreditreport.com at least once a year to request your credit report and dispute any errors that may be pulling your score down.
The better your credit score, the more easily you will be able to make purchases, such as a home, or even a new car. When you are ready to finance one of these things, visit us at www.bank.bank/personal/personal-lending.
These tips are provided by the Iowa Bankers Association.