What is a credit score? Your credit score is essentially a grade, showing companies how likely you are to pay a loan back on time. Your credit score will be an important factor in your financial life because it will help determine whether or not you can get a loan, the interest rate, and credit limit you receive. Here are some tips on how to strengthen your credit score.
1. Pay your accounts on time
It may sound obvious, but your ability to make payments on time is one of the biggest, if not the most important factor that affects your credit score. If you can prove that you pay your loans and credit cards on time, lenders will be more inclined to offer you the loan you’re looking for and at the best rate. Keep an eye on your credit card balance and create a budget to make sure you have enough money to make more than the minimum payment each cycle. Making the minimum payment only on your credit card will hardly make a dent in the balance and can take you years and extra interest to pay off.
2. Do not max out your credit cards
When a high percentage of your credit has been used, this can indicate that a person is more likely to make a late or missed payment. A good rule of thumb is to keep your credit utilization at 30% or less. For example, if your credit card limit is $1,000, make sure to keep your balance at less than $300.
3. Be patient
The average age of information and the oldest account on your report will affect your overall score. Your credit score won’t drastically improve overnight, that’s why it’s important you build responsible, long-term financial habits now.
Your credit score will play a major role in your life and can lead to many financial perks. Don’t be discouraged if you’re just starting to build your score or get your score up to as it once was. We all started somewhere and remember, you can always improve.
Access your credit score for free and use our credit score simulator within Online or Mobile Banking. The credit score simulator will show you how making changes like paying down a credit card will impact your credit score.
Sources:
https://www.consumerfinance.gov/ask-cfpb/what-is-a-credit-score-en-315/
https://www.myfico.com/credit-education/whats-in-your-credit-score
https://www.experian.com/blogs/ask-experian/ways-to-keep-credit-utilization-low/
