There are many compelling reasons to ensure that you have a healthy credit score. Not only does it make getting large loans and a mortgage easier, but you are more likely to pay a lower interest rate on your loans, and utility service companies are more likely to provide their services to you. Good credit can also help if you’re planning to start a business, and it can even affect your job search since many employers do a credit check as part of the hiring process.
It’s important, therefore, to do what you can to boost your credit score so that your future financial security won’t be compromised and your lifestyle goals can be achieved.
According to a July 2015 Experian report, Millennials have the lowest credit scores and use credit less than previous generations, so it’s important for this younger cohort just starting out to learn more about how to improve their credit rating.1 But it’s just as important for older folks to know how to boost their score, and Go Banking Rates2 and Forbes3 have some tips for doing just that:
- Pay your bills on time. Organize your bills as they arrive and keep track of their due dates so you’re never late making a payment. If it’s available, set up an automatic payment for recurring bills so you don’t even have to think about them. Your payment history makes up 35% of your credit score, so paying on time is critical.
- If possible, don’t carry a balance on your credit card. Of course sometimes life happens and you can only manage to pay the minimum payment, but whenever possible pay off the entire balance in full before the due date. Not only will you avoid the often-outrageous interest rates, but it will also demonstrate your reliability as a borrower.
- Negotiate with lenders if you miss payments. It never hurts to ask, and some lenders will agree to “erase” a debt or any account that went to collection if you agree to pay the remaining balance. You can also ask for a “good-will adjustment” if you have an otherwise good history with a creditor but made a few late payments. Make sure to have the creditor agree in writing before you make your payments.
- Get a credit card. It may seem counterintuitive, but in fact having a credit account in good standing is a great way to be seen as a reliable borrower. And the longer you have the account, the better. That’s also the reason why it’s good to keep old credit cards (and use them occasionally – as long as you pay off the whole balance each month) rather than close down those otherwise inactive accounts. Closing down an inactive account will also cause your available credit to drop, which doesn’t look good to a credit bureau.
- Remember to use cash too. Even if you completely pay off your credit card each month, routinely charging close to its maximum will make you look like a spendthrift to credit bureaus. You should ideally charge no more than 30% of your limit. Ten percent is ideal.
- Ask for an increased credit limit. Just make sure you don’t increase your spending habits because you now have more credit. Simply enjoy the fact that a borrower believes in your ability to be a reliable risk.
- Live within your means. Cars break down, teeth need to be fixed, and someone is always getting sick, so when things are calm, make sure you’re spending responsibly and not relying on credit for things that are wants rather than needs.
At Foresters, our purpose is to help everyday families achieve long-term financial health and security. As a Foresters member, you always have access to Everyday Money, our toll-free financial helpline that connects you to an accredited counselor who can help answer your questions about your personal financial matters such as debt management and budgeting. Visit MyForesters.com to find out more.
415857B CAN/US (03/18)