You’ve just checked your credit score and you’re a little disappointed by the results. You want to give it a boost, but you’re not exactly sure how to make it budge.
There’s no need to wonder anymore. There are a few simple habits that you can adopt that should help you raise your credit score over time.
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Paying Bills on Time
Your consumer credit score is measured via several factors: credit history, credit mix, new credit, credit usage and payment history. If you regularly miss the due dates for your bills, your credit score could suffer. It shows that you have an inconsistent, irresponsible payment history.
So, what can you do? Get in the habit of paying your bills on time. Stop letting those deadlines slip your mind. You can do this by downloading bill tracking apps—these will help you manage the due dates of all your recurring bills, including the bills for your credit accounts.
You can also automate your bill payments. By automating your payments, you can guarantee that your creditors always get paid in full and on time.
Pay Down Your Balances
You may have noticed that credit usage is another factor that contributes to your credit score. Your credit usage is how much of your credit you’ve already used. Do you have plenty of available credit left over, or are your account balances close to their predetermined limits?
Too much credit usage can lower your score because it increases your chances of late payments, defaulted loans and maxed-out accounts. So, you can minimize the risk and improve your score by getting in the habit of paying down your outstanding balances. You’ll want your credit utilization rate to be under 50%. Ideally, it should be below 30%.
You can technically improve your credit utilization ratio by increasing your credit limits, but this is not always the best plan. The limit increase can tempt you to borrow even more of your available credit and get yourself into a trickier financial spot.
Lumping Hard Inquiries Together
A hard credit inquiry is when a financial institution has to check your credit report. It’s a common part of the loan application process. A hard inquiry will be recorded on your credit report and can temporarily lower the score. Getting frequent hard inquiries will have a bigger impact.
However, when multiple hard inquiries are completed in a brief window, they can be counted as a single inquiry. This allows people to “rate shop” for mortgage loans, auto loans and similar borrowing options without doing serious damage to their credit score. Typically, this window will last between 14-45 days.
Making a habit of lumping all of your hard inquiries inside this brief window can have a positive impact on your score.
The Exception for Hard Credit Inquiries
Rate shopping doesn’t work for all types of hard credit inquiries. You will need a hard inquiry to apply for a brand-new credit card. That inquiry will be added to your report and affect your score. If you decide to apply for a second credit card soon after, its hard inquiry will also be recorded — and it will also affect your score. It doesn’t matter if your applications were within 14-45 days of each other.
The same goes for personal loans. If you don’t have enough savings to cover an urgent expense, you might decide to go to a website like CreditFresh and apply for an online loan there. Your application for the emergency online loan could get approved quickly, giving you access to enough temporary funds to pay off your expense. It could be a huge relief.
Personal loans require the provider to do hard inquiries every single time. There is no opportunity to lump inquiries together to conserve your credit score.
In actuality, applying for multiple credit cards, personal lines of credit or personal loans in a brief period is seen as risky financial behavior. If you make a habit of doing this, the more damage you can do to your score. You will also increase your likelihood of getting your applications rejected.
These habits should help you with your credit score over time. Follow them, and you just might notice your score moving up the ranks.