Your credit score is not just a random number. There are various financial factors that go into its calculation, and all told, it paints a picture of you as a potential borrower.
A higher credit score indicates that you are a reliable borrower and likely to meet your obligations. A lower score indicates that you may have had difficulty making payments in the past and are at higher risk.
Whether you’re looking to apply for a mortgage, personal loan, or credit card this year, the higher your score, the more likely you’ll be approved. And in the case of a loan, a higher score could be your ticket to a lower interest rate, which can make monthly payments more affordable.
If you think your credit score could use some work, you’re in pretty good company. A recent CIT Bank survey reveals that 48% of Americans aim to improve their credit rating this year. Here are some steps you can take to increase that number and open the door to more borrowing choices.
1. Pay all bills on time
Your payment history carries more weight than any other factor when determining your credit score. Being on time with your bill payments could help improve your score.
To make sure you’ll end up paying on time, set calendar reminders for the due dates of your various bills so you don’t fall behind out of sheer forgetfulness. An even better bet is to set up your bills to be paid automatically when possible.
If you’re worried about being late with your bills due to lack of money, set a budget and adjust your bills accordingly. You may need to reduce your spending in certain areas, such as hobbies, to make sure you can meet your non-negotiable bills.
2. Reduce your credit card debt
Even if you are able to make your minimum monthly credit card payments on time each month, too high a balance could cause your credit score to drop. That’s why it’s a good idea to work towards paying off your existing balances.
One tactic that could help is to do a balance transfer, where you transfer your existing balances to a single card which may come with an introductory APR of 0%. That said, you usually need a pretty good credit score to qualify for a balance transfer, so that might not be an option.
Even if you can’t do a balance transfer, increasing your income with a side hustle could leave you with extra money at the end of each month – money you can use to reduce what you owe.
3. Check your credit report for errors
The credit bureaus that compile your credit report sometimes get incorrect information that can land on your report and cause your credit score to drop. That’s why it’s so important to check your credit report several times a year and make sure it’s accurate.
In the meantime, if your goal is to end 2022 with a higher credit score, get a copy of your credit report now and check it for errors. If, for example, you see an overdue debt listed in your name that you don’t recognize, that’s something you’ll want to look into. It could be that someone with a name or social security number similar to yours incurred this debt, but it accidentally landed on your credit report. Removing it could be your ticket to a quick credit score boost.
There is a lot to be gained from increasing your credit score. If you think yours needs work, follow these steps to increase your chances of seeing that number grow by the end of 2022.
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