A bad credit score doesn’t have to be the end of the road for your dreams. While staying within a healthy credit score range is something we all aspire for, sometimes life can get the better of us. It can be especially hard to keep up a good credit score in the face of a job loss or pay cuts at work. With everyone from potential employers, landlords, banks and credit card companies and even spouses-to-be, checking up on credit scores and credit history, it is more important than ever to work on raising your credit score.
When is a credit score bad?
A typical FICO credit score ranges from 300 to 850. If you know how to check your credit score, request yours. If you aren’t among the lucky lot with scores in the 700s and 800s, or worse, find yourself with a number at 550 or below, you need to worry. If you find yourself getting a less than great number on that credit report, it is a good idea to get clued up on how to improve your credit score.
Little changes that make a big difference
Set up standing instructions
Your credit score considers among other things, your track record on payments for existing debt and historical debt. If you have a good history of paying up, your score will improve. On the flip side if you are awful at remembering due dates, you may find one too many missed payments on your record. Setting up standing instructions with your bank so payments for your debt or utilities can go automatically every month as soon as they are billed, is a good idea.
Pay the minimum due
It is always better to clear your entire outstanding on credit card bills, but at the very least, be sure to pay the minimum due. This will prevent your account showing up as delinquent or late.
Keep your credit card usage down
Having a credit card and using it is fine, but using more than 30 percent of the limit gnaws away at your credit utilization numbers and beyond a point starts to eat away at your score.
Make regular payments on installment loans
If you have an installment loan, even if the amount outstanding is large, if you start making some payments towards it regularly and within the stipulated time, it reflects favorably on you.
Get smart about what credit you use
Take care which credit mode you use for what. Knowing how to manage your debt smartly, using the appropriate mode from the mix shows the lender you are a responsible individual. Take an auto loan to fund your car purchase and don’t swipe your credit card for the downpayment if you can avoid it.
Don’t try and build credit history overnight
If you’re someone without much credit history perhaps because you never had the need for a loan and didn’t apply for a credit card earlier, you may find your lack of credit history is preventing you from having a good credit score or at least one that’s in the healthy credit score range. The solution is not to open up a slew of cards and apply for a couple of loans in a rush. This will actually work against you! It will put you squarely in the risky category.
Check credit scores again – and again
Once you know how to check credit scores, it will be prudent to review it from time to time, especially after you have taken on new debt or worked at building a good credit score.
Once you know how to increase credit scores, it is just about tightening up your control on your finances, being a little more aware and making your money work smarter for you. The next time you check your credit score, you may find things are inching back to normal for you into a good credit score range.