We’ve all got some big plans for the new year, whether it’s starting a business or growing an existing one.
Others may want to buy a car or start putting money toward a home, and all of these have one thing in common.
In order to get that loan you need to make a dream into a reality, you must first improve your credit score.
Doing this can help broaden your horizons and make borrowing much more affordable and available to you.
In fact, the difference between a 700 and 650 credit score is the difference between a 4.9 and 7.25% interest rate.
Good credit is generally having a score of 670 or higher, and the better your score is, you’ll have more access to favorable loans.
Additionally, having a good score may also help with renting an apartment, as well as many other things.
With this in mind, getting your score back in shape seems that much better, and there are a variety of things you can do to improve it.
Get rid of holiday debt
Once the holiday season dies down, you’re highly likely to still have some leftover debt from purchasing gifts, food, and drinks throughout the season.
This tends to pile onto your regular bills, and if you’re not keeping track, you’ll easily get caught in an avalanche of late payments and high-interest rates.
If you want to avoid this, you’ll want to immediately start getting rid of your holiday debt.
Of course, if you’re only paying the minimum, it’ll take significantly longer to finish this process, and it’s why it’s not considered a recipe for success.
However, you may want to try paying slightly above the minimum on your most recent accounts, at least according to Tom Christensen, Money Fit’s education manager.
He believes that by employing this strategy, one can improve both their FICO and VantageScore credit scores in one fell swoop.
Don’t be too eager to apply for credit
If you keep applying for new credit every so often, it quickly becomes a horrible habit, and it’s one that’s difficult to get rid of.
On top of this, it raises a big red flag for banks and lenders, negatively impacting your credit score.
Every time you apply for another credit, your current score will be updated, and every additional inquiry will lower it by a couple of points.
Kate Mielitz, a financial counselor at Olympia, Washington believes that applying for credit cards once or twice every month is a clear sign a person is desperate.
This is highly frowned upon, and it’s what may drive your credit score to unprecedented lows.
In fact, some lenders may even begin turning you down or offering you undesirable terms, like high-interest rates.
Raise your limit
If you feel like you’re spending too much, you can always ask your credit card issuer to increase the limits on your card.
With higher limits, your utilization will go down, but that’s only as long as your spending doesn’t increase.
If you wish to continue building your score, many experts recommend keeping your utilization below 30% of your card’s limit.
This way, you’ll demonstrate that you’re responsible with the money you’re given and make you a far better option for banks and lenders.
Use rent and utility payments to improve your score
Some credit scoring companies tend to not factor in your rent and utility payments toward your total score.
This is because the information pertaining to these payments isn’t usually on your credit reports.
If you’re planning on capitalizing on these and improving your score, you can use a service like Pinata to report your rent payments.
Pinata is a free service, whereas others may charge you or your landlord for the information they provide.
If Experian calculates your credit score, you can use their Boost option to report rent, utility, and even streaming service payments you’ve made every month.
As long as those are from connected bank accounts, these will contribute to improving your credit score.
Don’t look past your credit reports
Keeping up with the reports on your credit history is key if you wish to crack down on what’s dragging your score down.
The companies that calculate your score may not be aware of a mistake in the report, and it may be what’s causing your score to go down.
This can either be a late reported payment that you actually paid within the deadline or a mistyped amount when the report was generated.
Sifting through monthly reports does sound like a daunting task, but once you’ve got the hang of it, it’s fairly simple and you’ll quickly notice a mistake if there are any.
Doing this should become a regular habit if you want to stay on top of your finances, and you can even receive weekly reports completely free of charge by utilizing the service AnnualCreditReport provides.