It is still relatively early in the New Year. How are you doing on your financial resolutions?
If one of them was to save money, improving your FICO credit score would be a solid long-term strategy to make that resolution stick.
How can a good credit save you money? A low credit score could result in paying higher interest rates on credit cards and utility deposits customers with high credit scores do not have to pay. A NerdWallet study found that drivers with a poor credit score could be paying more than twice as much for car insurance as drivers with better credit. The Consumer Federation of America also notes that home insurers in some states may use credit scores to help gauge the risk level of a potential customer and to accurately price that risk in their premium.
A FICO score between 800 to 850 puts you among the credit elite. A score of 620 puts you at risk of being considered to have bad credit. Here are a few ways to give your credit score a boost.
A good place to start is to review your credit reports to make sure there arent any errors that could negatively impact your credit score. You are entitled to a free credit report from Equifax, Experian and TransUnion, the major credit reporting agencies whose information is used to calculate your credit scores.
Another way to lower your credit score is to pay your bills on time. Just one skipped payment can drop a credit score by 100 points,
Anyone looking to raise their credit score should keep the phrase credit utilization in mind. This is the amount of your credit card balance you use in relation to your credit card limit. Which is why experts recommend paying down credit card debt as a way to boost a floundering credit score. Balances should be kept to no more than 30 percent of your credit limit, according to NerdWallet. Asking an issuer to raise your credit limit on your current credit card could help put you under that target figure.
It might sound counterintuitive, but another way to raise your credit score is to open a new credit card account. Again, this is where credit utilization can be your friendhellip;as long as you use your new card responsibly.
In paying off credit card debt, Forbes recommends not closing the account, but instead keeping it open while cutting up the plastic, but not before selecting a monthly bill that can be paid with that credit card and setting up automatic payment. Then, set up full automatic payment of that credit card bill, This ensures you have monthly activity on your credit report without access to the actual credit card.
Before you can improve your credit score, it helps to know what it is. A significant majority of affluent investors (77 percent) are aware of their credit score, while an even higher percentage (81 percent) is not worried about its impact on their ability to borrow, according to Spectrem Group research. As such, the highest percentage (31 percent) check their credit score only occasionally, while 28 percent review it annually.
Your turn: Have you boosted your credit score? Share your successful strategies in the comments section.