Whether you like it or not, your credit score determines your financial wellbeing. You may have enough money in the bank for a down payment on a home, but every type of lender—mortgage lenders, leasing agents, and credit card providers—will use your credit score to determine the likelihood of repayment. As a result, it is essential to pour energy into enhancing this number whenever possible. Below, I have listed three essential tips for improving your credit score.
- Check your credit report. Repairing your credit score begins with assessing your situation. You can request a free copy of your credit report and check it for errors. The credit report contains all information used to calculate your score—late payments, account diversity, and length of credit. When choosing a free report provider, find a website that offers “soft” pulls rather than “hard” pulls; hard pulls, such as those experienced when applying for a loan, will negatively impact your score, whereas soft pulls will not affect it at all.
- Get your payment plans in check. On-time payments are the biggest contributing factor to credit scores. When scheduling payment, set up email reminders, write yourself post-it notes, or opt for paper billing. Paying down your debt on time is the best way to improve your score.
- Diversify your credit. If student loans are you only form of debt, your credit score is not likely to grow very much. If this describes your situation, apply for a credit card. Responsible spending and re-payment on a revolving account is one of the best ways to immediately improve your credit score. Lenders often consider somebody without a credit card to be a higher risk than someone who has managed credit cards responsibly.