A good credit score is essential as a pathway to a lot of things that you probably want or need.  Looking to buy a bigger or nicer home? Is your car falling apart? Are you dreaming of that pool you can dive into on those 100+ degree days that are coming this summer?  For any of those, you will need a relatively good credit score to get financing/loans from a reputable institution. Some of us are not there yet, but don’t worry, it’s not that far away!  Here are 5 tips to quickly and easily improve your credit score, so you can realize those new car dreams.
- Get to Know Your Score: The first step to a good credit score is to know what your credit score actually is.  That’s right. Rip the bandaid off. For a free look at your score that won’t actually affect your score, sign up at Credit Karma.  This website will actually breakdown any outstanding accounts you have, all the credit balances you have open, and any alerts you should know about.  Making your credit better may be as simple as paying off debts you didn’t even realize you had (ex: that X-ray bill from 5 years ago). You can also check for errors in your credit report and fraudulent charges that may have been accrued without your knowledge. Knowledge is power!
- Pay off Debt: Yes I know, this doesn’t sound quick or simple.  However, if you look at your credit report, there are no doubt some outstanding debts that you can pay off with your next paycheck.  $100 here, $50 there…it all adds up. Using the Dave Ramsey Debt Snowball, the idea here is to pay off the smallest amounts first so you are getting rid of the little debts and working your way up to the larger amounts.  Another way to do it is to see which of your debts are carrying the highest interest rates and pay those first. Either way, set yourself up on a plan and get to paying. Any amount makes a dent.
- Do not close credit accounts: Some people get excited about paying credit cards and accounts off, and then they close them to celebrate. Â However, since your credit score is somewhat based on a debt to credit ratio, this is actually not the best idea. Keeping those accounts open with low balances is actually better than closing them, because it keeps your credit active without the ratio being too high.
- Limit inquiries: Anytime you apply for credit, it is a hard inquiry on your history.  This means that it affects your score negatively. While sometimes this cannot be helped, it is important to try to avoid credit inquiries so that you can limit this effect. This means thinking twice about applying for that department store card that you want because you get all the coupons when you apply.  It’s not worth it in the long run.
- Set up automatic payments: I cannot tell you how many times my payments have been late because I had to submit them manually and I just completely forgot.  In this day and age, this is not an excuse to have late payments, and yet so many people fall victim to this mistake, resulting in a ding to your credit score.  Many banks have an online tool where you can set up automatic payments to outside vendors, and almost all credit companies have online access or an app where you can set up automatic payments.  You don’t even have to think about it, and then your payments aren’t late. Make the technology work for you and take the 3 minutes it would take to set this up. You can see yourself trouble, and a few credit points.
Arm yourself with the tools and knowledge you need to make good financial decisions, including making sure your credit score can get you whatever your heart desires!