Whether it’s to improve a low score or to get a better loan rate in the future, building or rebuilding your credit is a good move.
The benefits to a higher credit score include paying lower interest rates on a car loan, credit card or a faster loan approval process.
“While improving your credit score isn’t as hard as many people fear, as with most things, taking the first step is the hardest part. Some people avoid looking at their score all together out of fear. It is important to remember that you cannot improve your financial situation until you know your starting point,” said Cindy Shogry-Raimer, VP Director of Community Development.
There are ways to get your credit score trending in the right direction regardless of your financial situation. Here are some helpful tips:
- Set a goal. Establish a goal to build or rebuild your credit and have a reason to want to reach it. This will give your goal a purpose and help you to stay motivated.
- Check your score. Tracking your progress is important to do either monthly, bi-monthly, or at a minimum, yearly, to track your progress. It shows your starting point and lets you see how far you have come. These check-ins provide motivation and/or encouragement to make improvements.
- Make all payments on time. Payment history makes up 35 percent of your credit score, so it is important to at least make the minimum payment every month. Setting alerts on your calendar is a smart way to stay on time with payments, as is using autopay.
- Pay down debt. Your debt impacts 30 percent of your score. Ideally, try to keep your credit card balances at, or less than 30 percent, of your credit limit. For example, if you have a $1,000 credit limit on your credit card, try to keep balances below $300 (or 30 percent). This is often referred to as your credit utilization.
- Building history takes time (credit history). The length of your credit card history affects 15 percent of your credit score. This can be challenging if you are just starting to build a credit score. Be patient, as it can take a couple years to build a solid credit history. Becoming an authorized user on another person’s credit card can help boost your credit score if the owner of the card has a good credit history. Of course, make sure to ask first!
- Keep your oldest account open and active. Tying into the length of your credit history, you want to continue benefiting from your older accounts that have been in good standing. Keeping that account open and continuing to use it can help your score.
- Dispute any incorrect or fraudulent information in your report. Another reason to check your credit score is to monitor for fraudulent activity or incorrect information. If something does not seem right or there is unknown activity attached to your credit report, please contact the credit bureau(s) immediately.
During your journey, it is important to remember that increasing your credit score takes time – consistency is key.
If you’d like help with improving your credit score, Greylock’s certified financial wellness coaches are available to assist. To learn more or make an appointment, please call 413-344-1026.