Like it or not, credit score a brand that is used to identify how credit worthy a person is. Lenders, owners of rental properties and even some employers will look at this number and make a judgement about how credit worthy you are. This translates into how much you can be trusted with money. Although not meant to be a judgement on who you are as a person, the importance placed on the number makes it hard not to feel that way.
A credit score number ranges from 300 to 850, with the higher number being the best and most coveted. A credit score from 800 to 850 is considered excellent, a score of 740 to 799 is very good, a score of 670 to 739 is considered good, a score of 580 to 669 is fair and a score of 300 to 579 is considered to be poor.
A high credit score is a lender’s dream and a ticket to loan approval. A score of 800 or more will open doors for many financial opportunities.
While a low credit score can be an albatross around your neck that keeps you from moving forward financially, it is not a life long sentence. If you do not currently have a high score there are ways to start working to build up to an 800 plus goal. It will not happen overnight, but if you start today you will reap the benefits before you know it.
1. Pay Bills On Time
This sounds obvious but is often easier said than done. If you are not bringing in enough money to pay your bills it can sometimes feel easier to ignore the bills altogether. Don’t do it. Make whatever sacrifices you have to make to get your bills paid. A late bill is a death knell to a credit score.
2. Build Your Credit File
It may seem counter-intuitive to add more credit to your name when you are having trouble increasing your credit score, but this is precisely the strategy you need to take. Credit companies will look at the amount of credit you have available to you. This does not mean max out multiple credit cards. It means having several cards open with high credit limits.
3. Keep Low Balance on Revolving Accounts
Focus on paying down revolving accounts like credit cards and lines of credit. Keeping these accounts high by only paying minimum balances is frowned upon by credit companies. The greater your available credit, the higher your credit score.
4. Do Not Apply For Credit Too Often
This is yet another confusing approach. Increase your credit file but do not do it too often. Each time you apply for credit, your application results in a hard inquiry of your credit. While that only results in a minimal hit to your credit, if it happens too many times in a month the impact on your score can be much more significant.
5. Avoid everything that can drop credit scores
Just like certain behaviors such as paying your bills on time can reflect positively on your credit scores, there are things that you may not know which might hurt your credit score in a major way. Though credit inquiries have little effect on your scores, multiple hard inquiries could take your credit score down by as much as 10 points every time they are placed. Hence it is important to monitor your credit report on a regular interval to clear errors and negative information.