3 Ways to Boost Your Credit Score in 2021
Put these on your to-do list for the new year.
You may not think much about your credit score on a regular basis, but it's actually more important than you might think. A high credit score could spell the difference between getting approved or denied for a mortgage, personal loan, or credit card. And with a new year kicking off, now's the time to work on boosting your score. You can do so by ticking these specific goals off your list.
1. Better payment history
Your payment history speaks to your ability to pay bills in a timely manner. Being on time sends the message to lenders that you're trustworthy and responsible, so it's important to work on improving your payment history. This is especially true because it carries the most weight of the various factors that go into calculating your credit score.
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So how do you improve your payment history? First, set a budget and stick to it. That will help ensure you have enough money set aside to make payments. Next, automate as many bills as you can. That way, your payments won't be late due to human error. Finally, set calendar reminders for the bills that don't offer auto-pay so you're aware of their due dates. A little mindfulness on your part could help you grow a solid payment history that does wonders for your credit score.
2. Lower credit utilization
Your credit utilization ratio measures the amount of revolving credit you're using relative to your total credit limit. A ratio of 30% or less is helpful to your credit score, whereas a higher ratio will harm it. That's why it's important to keep tabs on your existing credit card balances to make sure you're not going overboard.
At the end of each month, take a look at what you owe and see where your utilization ratio stands. If the number is too high, there are a couple of things you can do to lower it. First, you can pay off some existing debt. You may need to get a side job to drum up the extra cash, but it'll be worth it. You can also try requesting a higher credit limit on your existing credit cards one at a time. Though paying off debt is a better way to lower your credit utilization ratio, raising your total credit limit technically achieves the same goal.
3. Regular credit report checks
Ironically, your credit reports may not actually give you your credit score. But they'll still summarize your credit activity and alert you to any red flags.
Your credit reports contain information such as open credit accounts (including mortgages, personal loans, and credit cards), the length of time those accounts have been open, and your current balances. If you spot an open account you don't recognize, you'll get a heads up that someone may have opened an account in your name and is running up a tab that's hurting your credit. Similarly, you may see a delinquent debt on your credit reports that you already paid off. In that case, reaching out with proof of payment could get that negative activity wiped out.
Normally, you're entitled to one free copy of your credit report from each major bureau -- Experian, Equifax, and TransUnion -- once a year. But through April of 2021, you can access your report for free every week. In the course of 2021, aim to check your credit report from each bureau in January as well as April. Then, follow up with a request from one bureau at a time in July, September, and December. That way, you'll get a full picture of where your credit activity stands.
A solid credit score could work wonders for your personal finances. Stick to these goals in 2021, and you'll put yourself in a strong position to borrow affordably when you need to.
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