by Eric Volkman | Nov. 15, 2018
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Does your credit score need a boost? Life happens; sometimes our budget constricts and/or expenses balloon… and that debt pile starts to grow. This, combined with poor credit management habits, can wreak havoc on your credit score.
Not all is lost, however. There are numerous steps you can take to improve your credit score; here are three of them.
Creditors do not like when you're late to give them money. Reflecting this, credit bureaus heavily weigh timeliness with loan and credit card payments when evaluating your creditworthiness. Even if you just pay the minimum amount, you should always get your payments in by the deadline every month without fail.
Modern life is very fast-paced and full of details. As such it can be easy to miss an important payment date. Here is a pair of tried-and-true methods you can use to help ensure that doesn't happen:
Set up payment reminders -- Creditors are happy to remind you when a bill is coming due. These days, credit card issuers make it easy to generate automatic reminders. These can come in any flavor you like -- text message, email, or notification through your issuer's mobile app (assuming you've got it installed on your device).
Use the auto-pay service -- Similarly, your creditor is more than willing to have you establish a regular, hands-off payment that lands in their coffers. Establishing a recurring and automatic payment to your creditor is usually a very intuitive and straightforward process that can be done online or through a mobile app.
Caution is warranted here; make sure you've got enough funds in the account you're paying from, and make sure the payments make it through by the mandated deadline.
Another major factor the credit bureaus deem critical is the utilization rate. This basic math formula is the credit you've drawn divided by the total credit available. For example, if across all your credit cards you have a total limit of $20,000 and you have made $5,000 in purchases with the cards, your utilization rate is 25%.
Creditors like to see a figure below 30% to 35% or so; any higher than that and they worry that you might be taking on more debt than you can service. So it behooves you to keep your utilization rate below that level.
There are basically two levers you can pull to bring the utilization rate down:
Reduce your debt -- This, of course, is the most straightforward and effective method. Do take care to pay off what you can currently afford without cutting into the essentials; your rent and other bills still need to be taken care of!
Increase your credit limit(s) -- Turning to the other side of the utilization rate equation, getting a boost in the overall credit limit will cut the utilization rate down somewhat. Depending on your relationship with your credit issuers and the quality of your credit profile, you may or may not have access to automatic credit increases. Otherwise you'll have to apply for an increase.
It's imperative that you monitor your credit score. Whether through the free reports provided by your card issuer (an increasingly common perk these days), the once-per-year freebie from all three major credit bureaus, or a more comprehensive paid service from one of the trio, keeping track will greatly help you manage your financial life.
These reports contain detailed information on your credit status and history. But agencies and creditors, like people, can make mistakes. In fact, according to data compiled by the Federal Trade Commission, around 5% of Americans with credit history have errors egregious enough to result in higher prices for financial products.
So take the time to comb through your reports when they are updated and available. If the bureaus have made any mistakes, contact them immediately in order to get the situation rectified, with the offending error being removed from your record. All three bureaus have web pages through which you can file disputes.
Errors can occur in numerous facets of your credit profile. These include, but certainly aren't limited, to:
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