November 6th, 2017 6:52 AM by Jackie A. Graves, President
Your credit score is a three-digit number that determines a
lot in your financial life. It can make the difference between getting the
financing you need for major purchases, like a car or home. It can impact your
ability to secure the apartment you want. And, perhaps most importantly, it
determines how much borrowing money will cost you.
landlords, and others look at your credit score to help them determine how
creditworthy you are. In other words, they use this number to assess how likely
it is that you’ll default on a line of credit or loan (or not pay it back at all.) A
better credit score is evidence that you have made your payments on time and in
full in the past, and that makes you less risky to the lender. They’ll usually
reward that with a lower interest rate or a higher limit on your line of credit
or borrowed funds.
a lower credit score indicates you’re more likely to miss payments, make late
payments or not make payments at all. Lenders see you as a riskier bet, and if
they choose to offer financing, it will likely come with a higher interest
rate, which means you’ll pay more for that financing over time. (For related
reading, see: Things That Are Hard to Do With Bad Credit.)
your credit score is important. So how do you hack it? Follow these five
strategies to improve your credit score and secure a better interest rate on
your next loan, mortgage or credit card.
One of the biggest factors
determining your credit score is your credit utilization ratio.
That’s the relationship between the total amount of credit you have available
and how much you actually use. It’s expressed as a percent, and you should aim
to keep your ratio at 30% or less. So if you have a credit card with a $1,000
limit and regularly charge $500 to the card, your ratio is likely sitting at
can ding your score and keep you from improving it over time, even if you
regularly pay off the card and don’t carry a balance or other debts.
you’re financially responsible and use your credit cards wisely, but also find
yourself using up a lot of your credit at one time, consider requesting an
increase to the limits on your cards. This will give you more available credit
and, as long as you keep your spending the same, a lower credit utilization
ratio. (For related reading, see: 4 Common Credit Card Misconceptions.)
That being said, a 0% credit
utilization ratio can actually be worse than a high one. Back in 2014, Credit
Karma found that users with a 0% ratio had lower scores than
individuals who used 1%–20% of their available credit.
don’t shy away from using credit cards entirely. They’re not bad or evil.
They’re simply a tool in your financial toolkit you can use to
help leverage your cash flow. Credit cards only become “bad” when you
don’t use them responsibly, charge more than you can afford to repay to the
card or let balances sit and accrue sky-high interest.
You may feel like you can manage
a new line of credit while you work to improve your score, but FICO might not agree.
While working to give your score a boost, keep your credit situation stable.
Don’t open new accounts or take out new loans. This will keep hard pulls or
inquiries off your credit report.
hard pull signals that you’re looking for new lines of credit, and credit
bureaus file that on the risky behavior side of the credit spectrum. Whether
you really are scrambling to find financing or just interested in a new credit
card doesn’t matter, it’s how the bureaus interpret a hard pull. (For related
reading, see: Credit Score: Hard vs. Soft Inquiry.)
Have you tried all these
hacks and nothing seems to work to improve your credit score? You could be
weighed down by an error on your credit report.
to AnnualCreditReport.com every 12 months and request a copy of your credit
report. It’s free to do this once per year (but if you need to pull your report
more than once in 12 months, you’ll have to pay a small fee to do so). Review
the report carefully and check for errors. If you find one, you’ll need to
contact the credit bureaus and file a claim or
dispute so they can fix the mistake.
These tips and tricks can help
you hack your credit score. But it’s also important you stick with the
well-known, conventional action steps that are proven to help you improve your
credit score over time.
the best thing you for your score is also very simple. Don’t spend more than
you can afford to repay on your credit cards, and avoid taking out loans you
don’t truly need. When you do charge something to your cards or take out a
loan, make payments on time.
fundamental financial advice will help you keep not only a healthy score, but a
healthy cash flow, too.
By Herbert Kyles – To view the original article click here