Credit score; hard to live without it. Its a number, probably outside of your social insurance number that defines you. At least it defines to the possible creditor, whether you will get that new car or the home you are looking to purchase. So, how do you actually increase your credit score? It’s not an easy feat for sure. It’s a journey. Sometimes smooth and other times painful. This journey also takes time. Increasing your credit score is not done overnight. At best it takes months and sometimes even years to see a significant impact. For those of you with excellent credit scores, work hard at maintaining it. Credit score takes years to build up and only months to lose.
As mentioned above, this is not an overnight process. Accept the fact that it takes time, there are a few simple rules to follow towards increasing your credit score.
1. Paying bills on time
Paying your bills on time is essential. It shows the creditors you are responsible and take the due diligence in paying what you owe. When you pay your bills on time, your creditors will love you. Easiest way to ensure you pay your bills on time is to open the bills the day they arrive. Create a budget, preferably a bi-weekly budget. Break down your payments. Some bills you might pay on this pay period and others you might pay on your next pay period, that’s if you are on a bi-weekly payroll. Scheduling a proper bill payment schedule will ensure that you don’t miss any bill payments. There is no set schedule, as everyone’s situation is unique. Find what works for you and stick to it.
2. Stop applying for more credit
The more you apply for credit, the more it shows those creditors you are dependent on credit. There is no sense of getting all the latest reward cards or store credit cards. Find one or two credit cards for your needs and stick to them. If you need to buy a big ticket item, save for it and buy it in cash. Of course not all of us are fortunate to be able to buy everything in cash, but at least a good down-payment will go a long way. Only apply for credit when you absolutely need to do so. If you don’t need to, then don’t take the risk of hurting your credit score. You can negatively affect your credit score if you have a bunch of lenders asking about your credit in a short period of time. If you need to apply for credit, ideally once every 6 months is considered the norm.
3. Keep available credit of more than 60%
If you have a credit card with a limit of $1000, ideally you want to have $600 or more available at any given time. This is 60% of your limit. The more credit you have available at any given time, the better it looks on you. This looks particularly good, when you apply for new credit. The creditor will look at your situation and view you as not dependent on your credit for every day living.
4. Pull your credit score regularly
I try and pull my credit score every 6 months. Ideally you should try and do it every 3-4 months. This ensures that no incorrect information has been listed on your credit score. Furthermore, you can view the latest changes, positive or negative that reflect your score.
5. Use “Secure Credit” to build your credit score
Getting a secured credit card is one of the fastest ways towards rebuilding your credit. There is a caution tough. Make sure you sign up with a company that reports regularly back to the credit bureaus. There is no sense of having a secured credit card with someone, if they do not report regularly. Some good secure credit cards I would recommend are Home Trust Visa & Capital One Credit Cards. It typically takes 12-24 months if you get a secured credit card to obtain your own non-secured credit card.
Maintaining a good credit score is essential towards your future, especially when it comes to buying a home, a car – or anything of significant value, you are going to need to have a high credit score to get lenders to agree to loaning you the money. Finally, don’t forget to pay down your debt. Without or very little debt, you won’t need to rely on credit from others.