Advice for Improving Your Credit Score in the New Year
A good credit score doesn’t materialize out of thin air, but it’s more attainable if you make the effort to manage your finances responsibly.
Improve your financial situation in the new year by following these steps to raise your credit score.
A Step-by-Step Guide to Raising Your Credit Rating
You can easily raise your grade by implementing the following four strategies:
- Making sure you don’t overextend your credit
- Reviewing your credit report
- Paying down your debt
- Setting up automatic payments
To help you achieve your resolutions this year, we will dissect each of these suggestions.
Examine Your Credit Report
You might be curious about what affects your credit score before you pull your report. Key components of your FICO credit score include:
- Your payment history (35%)
- Credit utilization (30%)
- Age of credit (15%)
- Credit types/total accounts (10%)
- Credit inquiries (10%)
So that you can zero in on your objectives for the year, we’ve compiled a list of helpful hints. Every individual is entitled to one free copy of their credit report annually.
A credit report can be obtained once a year for free from annualcreditreport.com, and there is no better time than now to do so if you have not done so already.
All of your credit-related activities from the past seven years (or more) are included in your credit report and can have an effect on your credit score.
Check it for mistakes and make a note of anything that could be lowering your credit score, like missed payments or too much debt.
What steps should you take if you discover an error on your FICO credit report? The FTC advises consumers to notify both the credit bureau and the lender if they discover errors on their credit reports.
You should give them copies (not the originals) of any paperwork that bolsters your case, and you should keep copies for your own records as well.
Reduce your debts as soon as possible
If you have a high debt-to-income ratio, you may not be able to put the money you spend on interest toward the things you care about most.
Make it a goal to start the New Year off on the right financial foot by eliminating your credit card and other high-interest debts as soon as possible, rather than just making the minimum payments.
The following considerations should be kept in mind as you formulate your strategy:
· Credit utilization is not helped by paying off one card with another.
· Avoid shutting down credit accounts if you’re hoping to improve your FICO score; doing so could have the opposite of the desired effect.
· Decide to save money over the next six months so that you can put more toward paying off your debt.
Incorporate Recurring Billing and Payment Reminders
A smartphone can serve as a reminder for practically anything. Why not use this modern convenience to remind you when you have pending financial obligations?
It is imperative that you get in touch with your creditor as soon as possible if you have missed a payment.
It’s possible they’ll wipe out that one late payment you made years ago.
If you haven’t already, set up automatic withdrawals for bills that you pay regularly and in the same amount, such as your car payment and mortgage.
You can also set up recurring variable withdrawals, like credit card payments; just make sure your account is set up to deduct the full statement balance from the card each month, rather than the minimum payment.
Don't max out your credit card
Getting a credit card can be a great way to start building credit if you have none already. But don’t apply for too much credit.
Too many creditor inquiries on your credit report can be a warning sign to future lenders.
When your credit report is requested, you should be aware of this. Instead of spreading out your loan applications over a long period of time, do all your shopping at once.
By following these and other strategies to boost your credit score and get you on the right financial path to wealth.
