Do you love your credit score? Having a good credit score can save you money when you borrow money for cars, a home, or even credit cards. A score increase of even 50 points can make a huge difference on your interest rate and payment amount.
To improve your credit score, there are several steps you can take.
- Pay on time. Your payment history makes up 35% of your score. If you have missed payments in the past, make it a point to get current and stay current. The longer you show a good history, the better your score will be.
- Keep your loan balances manageable. The second highest factor in determining your credit score is the amount of debt you owe and what kind of debt it is. Learn about “good debt” verses “bad debt”. “Good debt” means owing on something that retains its value, such as a home. “Bad debt” means owing on something that does not retain its value, such as a clothing store card. Keep an eye on the amount of “bad debt” you have and make sure that is within your means to pay it off in a reasonable amount of time.
- Improve your credit history. If you have been managing credit for a short time, don’t open a lot of accounts too rapidly. This can reflect poorly on your credit score. If you have had credit for a long period of time, keep your old credit accounts open, even if you don’t use them. The older the accounts in good standing, the better your credit will look.
- Rate shop and don’t apply for too many accounts at once. If you are looking to obtain new credit, be sure to rate shop before applying. Too many credit inquiries within a short period of time can lower your score.
- Keep in mind the type of credit you are using. If you have a lot of store cards as opposed to credit cards, this can adversely affect your score. It’s better to have 1 or 2 widely accepted credit cards than several store cards. It’s ok to open a store card for special financing options, just make sure to pay it off as soon as you can. And always manage your cards responsibly.
For more information on how to improve your score, please read our tip sheet or visit with one of our financial experts by calling 406.651.AFCU (2328).