How Can You Help Your Credit Score?


Stressed man with bills

Think of your credit report as your financial resume. It says a lot about you and how you manage your money. It’s a summary of all of your debts – those you’re currently paying on, those you’ve paid off and it shows payment history, debt amounts and more. It’s your ticket to being approved for a loan or being denied. It determines how much interest you pay when it comes to the amount of money you want to borrow.  Maybe you’ve had some financial issues due to job loss, illness, or maybe you simply developed some bad financial habits like having too much money going out for bills and not enough money coming in.

Whatever your situation is, there’s always a way to help improve your credit score. May we suggest:

Pay your bills on time. This is pretty much a no-brainer. If a situation comes up and you know you’re going to be late with a payment or can’t make it in full, pay something and/or call the creditor to work out an alternative payment arrangement and make sure it’s noted in your account. Consider using an online bill pay system to help you schedule payments.

Credit card usage. Use them lightly. Just because you have a $5,000 limit, doesn’t mean you need to go on a charging spree. Use less than 30 percent of your total available credit.

Pay off your installment loans  (mortgage, auto, student, etc.).  This can help your scores but typically not as dramatically as paying down — or paying off — revolving accounts (think about all of those store credit cards you signed up for to take advantage of that point-of-sale discount) and other credit cards.

Lenders like to see a big gap between the amount of credit you’re using and your available credit limits. Getting your balances below 30% of the credit limit on each card can really help; getting balances below 10% is even better. Pay off  your highest-rate card(s)/loans first and then put those payments towards other debts such as credit cards that  are really close to their limits.

Pay more. Anytime you can pay more than the minimum payment, do it. You’ll end up paying less interest in the long run. Remember, every little bit helps.

Lines of credit. Too many open lines of credit, whether or not you’re using them, may send a red flag up the pole to potential lenders.

Balance. Maintain a good balance of credit between your installment loans (car loans) and credit cards.

Old credit is good.  If you have charge cards you haven’t used in a while or have paid off, but still have open lines of credit, use them once in a while and pay them off in full each month.

Check your credit report. You are entitled to a free annual credit report from www.annualcreditreport.com. Go there, order up your credit report, grab a cup of coffee and take a good, long hard look at it. Make sure you get it from all three credit reporting agencies – TransUnion, Experian, and Equifax. Dispute any discrepancies you may find. You don’t necessarily need to correct accounts you closed listed as being open or accounts you closed that don’t say “closed by consumer.” Closing an account may hurt your scores. If your goal is improving your scores, leave these alone.

Pay attention to significant errors. Sometimes life deals us a bad hand – you have financial issues due to job loss, medical issues, divorce, gambling problems, and so on. If you have any of the following on your credit report, it is worth your effort to correct these issues sooner rather than later:

  • Late payments, charge-offs, collections or other negative items that aren’t yours.
  • Credit limits reported as lower than they actually are.
  • Accounts listed as “settled,” “paid derogatory,” “paid charge-off” or anything other than “current” or “paid as agreed” if you paid on time and in full.
  • Accounts that are still listed as unpaid that were included in a bankruptcy.
  • Negative items older than seven years (10 in the case of bankruptcy) that should have automatically fallen off your reports.

Additional resources:

Members 1st FCU offers free access to money management and financial education services through GreenPath, a financial management program. Through comprehensive education and exceptional service, GreenPath has been assisting individuals for more than 50 years. As a member, you can receive assistance with:

  • Personal and family budgeting
  • Understanding your personal credit report and how to improve your score
  • Personal money management
  • Debt repayment
  • Avoiding bankruptcy, foreclosure, and repossession

NerdWallet

Federal Trade Commission

Board of Governors Federal Reserve System

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