10 Hacks for a Good Credit Score

You’ve heard it before and you’ll hear it again: Pay attention to your credit score.

The truth of the matter is that credit profiles – and the scores that go with them – really do matter.

A good credit score and credit report can significantly impact an individual’s financial future in many ways:

• Borrowing money and determining the interest rate you’ll pay relies on past payment history. Higher credit scores are important components of a mortgage lender’s decision to lend you money.

• Renting an apartment. Landlords frequently check credit to get an understanding on whether you will pay the rent on time.

• Leasing a car. A poor credit score will generally mean a higher down payment. In addition, lenders will offer the best interest rates to people with the best credit scores. A low credit score can affect the type of car you can lease.

• Determining auto insurers’ rates. Car insurers review credit files to help predict odds that someone will file a claim. Credit scores can actually have more of an impact on premium price than other factors.

• Getting a job.  Some employers run credit checks on people who are applying for jobs to check financial stability and debts. These are important factors for positions that require access to large amounts of money or sensitive information.

Fortunately, you can take the reins to improve your credit score.

By following these steps, you’ll improve your credit profile, increase your credit scores and better your financial future.

1. Know where you’re at.

A credit score involves three scores from the three major credit reporting agencies – Equifax, Experian and TransUnion.

All three are required to provide a credit report.

Consumers can access credit reports once each year for free at annualcreditreport.com or by calling 877-322-8228.

2. Review reports carefully.

If your reports show any inaccuracies – from address to an incorrect outstanding balance on a credit card – correct them.

The fastest and most effective way is to follow the directions on each agency’s website.

Under terms of the Fair Credit Reporting Act, the credit bureaus must investigate any disputed items and remove them from the credit report if they cannot be verified.

3. Pay every bill on time, all the time.

On-time payments are the most important factor in developing good credit.

They account for 35 percent of a score.

Get organized to make sure you never pay late.

Deposit cash or checks as soon as you receive anything.

Open all bills when they arrive and pay each immediately.

Alternatively, set up a bill-paying filing system.

What matters is that you know what you owe so that you can pay on time and avoid late fees and penalties.

You can also set up auto-pay options for monthly bills such as phone, utility or rent.

Also, look into automated deduction plans that many utility and mortgage companies offer.

In these arrangements, the companies will withdraw funds directly from your bank account according to the schedule you set up (so you are assured of paying on time).

4. Minimize percentage utilization and maximize credit available on credit cards.

If you have a credit card with a limit of $10,000, and you owe $3,500 on it, that’s 35 percent utilization.

Anything over 35 percent is considered too high and can impact your good credit score.

Over 50 will have a definite negative impact on a credit score, and a maxed-out card will very negatively impact the score.

Your best bet: Charge just a couple of small purchases each month, and then pay off in full and on time.

5. Do borrow.

The credit agencies rely on past payment history to gauge how borrowers will do in the future.

If you don’t borrow, they have no information to rely on.

Most adults find it helpful to have one credit card for personal business use, but multiple cards are not necessary.

6. Stay away from retail store cards.

These cards often have very high interest rates.

Sometimes they are issued by finance companies, which can, in some cases, have a negative effect on credit scores.

Most people are better off using a regular credit card.

7. Carefully consider canceling any credit card with a long (positive) history.

The longer you hold a card, the more valuable it is in your credit score determination.

8. Avoid “credit repair.”

People who want to improve their credit scores quickly turn to credit repair services.

These services work to achieve a temporary improvement in a consumer’s credit score by disputing items in the individual’s credit file.

Once a dispute has been filed, the onus is on the credit reporting agency to remove or suspend that account from the consumer’s record until the dispute has been resolved one way or the other.

This action can provide temporary relief from adverse items in the file.

However, it is analogous to having a flat tire and putting a temporary patch on it – and expecting the car to run just perfectly into the future with no additional attention.

Another problem is that a lender who does some research will uncover the disputes and see what is going on.

Credit repair services can be expensive, and do not solve any root problems.

Plus, disputing real errors that may be found on a credit report is only one part of truly improving a credit score.

The good news is that there is nothing that a credit repair service can do that you as a consumer can’t do yourself.

9. Remember that each spouse needs to be responsible for his or her own credit score.

Many people think that once they are married, they will share credit scores.

That is not the reality.

Each person has his or her own credit score, based on the accounts in his or her name (even if sharing the same last name).

Each spouse still needs to check his or her own credit reports, and review and correct errors on their own reports.

Also, some people believe that once they get married, they should cancel credit cards and make joint accounts.

Married people are wise to always keep a credit card in their own name, and maintain a good credit score on those cards.

10. Learn to live within your means.

This may be the most important cardinal rule for improving not only your credit scores, but your entire financial well-being.

If you use a credit card, remember it is a convenience, not a license to spend.

One should not carry credit card balances month-to-month.

Living within one’s means includes charging – and paying for – only what you can pay off in full each month.

If you can’t do that, don’t buy it and don’t charge it.

Remember that taking care of your credit profile is more akin to a marathon than a sprint.

It’s a process, and requires you to be consistent and vigilant.

Follow these steps and you’ll be well on your way to a good credit score.