By now, you’re well aware of the fact that money runs the world as we know it. But how familiar are you with the intricacies of credit?
Your credit score, also known as your FICO Score, is the universal indicator of your financial well-being. It’s based on a 300 to 850 range and it helps determine your ability to get a loan and what rate it will have. Basically, the higher the credit score, the better financing options and rates you have.
The good news is you don’t need to be an accountant to raise your FICO score. Here are a few quick ways to get that score up where it belongs.
Check and Clean up — your Credit Report
First, you’ll want to see where exactly you stand in the eyes of the three major credit bureaus: Equifax, Experian, and TransUnion. All three compile similar credit reports that determine your creditworthiness to landlords, lenders and even some employers. You’re entitled to one free report from each a year, so take advantage of it. Requesting more than one, however, can cost you money and send up flairs that could hurt your overall credit score.
Once you have the reports, comb through them with a fine tooth comb to find any late payments, unpaid bill, inaccurate charges or anything out of the ordinary. If it all checks out, you’re on the right track.
If you do see anything unusual, don’t panic. Nerdwallet reports about 5 percent of consumers have errors on their credit reports bad enough to result in a higher price for a financial product or insurance — and about 1 in 4 reports contain errors that might have at least a small negative effect on scores. If you see something, contact the credit bureau or your bank as soon as possible to find out how to resolve the issue.
Fix Your Credit Utilization Ratio
If your credit card balances every month are more than 30 percent of your credit limits, your score is suffering, according to credit.com, even if you’re paying off your balances in full and on time every month.
So how do you fix your credit utilization ratio? There are a few different options.
Increase your credit limit. Look at each of your current credit cards and ensure you have the maximum credit line offered. Most banks will let you upgrade in the same day by entering your annual income and rent payments. If that option isn’t available, visit your nearest bank or call its customer service line.
Open a new account. If you can’t increase your credit limits any more than you have, consider opening a new account. Don’t be tempted to spend irresponsibly on that account, however. Its main purpose is to fix your credit utilization ratio, not to shop with.
Pay down your balance. The most simple way to improve your credit utilization ratio is to pay down your balance in a timely manner. That’s usually easier said than done, though. Make a budget, determine how much you can realistically pay each month, and try to stick to it.
Time your Payments Right
Once you’ve reached a point where you can make one solid credit card payment a month, make another appointment with yourself to budget and determine how much you can afford to pay twice a month.
Creditors only report to the three major bureaus once a month and if you’re making your payment after the creditor makes their report, you could be hurting your own credit score. Aim to make one payment at the beginning of the month, and then make one more a day or two before your credit card company send their reports. If you’re not sure when that is, just call the customer service on the back of your card — they’ll be able to tell you.