Your credit score is often more critical than you think. If you can take care of it, you can sometimes improve your financial life enormously, giving you more freedom than ever before.
But what lifestyle changes can boost your credit score? That’s the question on many people’s lips these days. They want to know what they can do, if anything, to improve their situation.
Fortunately, this post is here to help. It runs through some of the alterations and additions you can make to get to the point where you’re flying high.
Pay Your Bills On Time
You want to start with a policy of paying your bills on time. While it might seem obvious, it is often one of the best ways to improve your credit score and really see changes in the loans and interest rates you can get.
It takes a while of consistent bill paying to improve your credit score. If you can keep regular payments for more than 2 and a half years, you will often see marked improvements. Three years is even better.
FICO will often look back across the whole of the last three years to see whether everything is being paid on time. If it is, then you’re in the right place and you won’t need to do anything, other than wait.
If you’re not paying bills on time, make sure you automate them. Set up payments with your bank account, like direct debits, to ensure that the money goes out every month and you don’t experience any further issues.
Cut Down Your Credit Card Balances
You also want to focus on cutting down on your credit card balances. If they are too high, then it could be a sign that you’re struggling to pay your debts and can’t afford the interest payments.
Reducing your credit card balances is something you’ll want to focus on if you’re using more than 50% of your allowance. Experts like to say that using around 30% is optimal, since it means that you’re not relying on credit but that you’re also proving that you can pay people back.
For example, suppose your credit card limit is $20,000. This means that you’ll want to keep your total borrowing under $6,000.
Also, remember that credit rating agencies talk to each other to calculate the amount of money you owe to lenders. If they see that you’re borrowing more than you can afford on multiple credit cards, that can be an issue.
Don’t Open Too Many Accounts
Related to this, you’ll want to avoid opening too many accounts. Whenever you apply for credit, brokers record the information and then pass it around to each other. If they observe a flurry of activity, they could perceive this as evidence that you’re not solvent and that you’re finding it much harder to pay your expenses from income.
For this reason, you’ll want to cut down on new credit card and loan applications where you can. Sometimes, you’ll need to purchase a vehicle or spend money on an essential piece of maintenance, but these events should be relatively rare.
Remember, opening multiple accounts contributes to around 15% of your overall score. Therefore, it can have a profound impact if you’re not careful, making it harder for you to get the interest rates that you want.
Regularly Check Your Credit Report
Another change you can make to improve your credit rating is to regularly check your report. Sometimes, data brokers make mistakes and these show up in the financial information they hold about you.
If you think that they might have made a mistake but aren’t being responsive, go to a consumer protection attorney. Legal professionals can get to the bottom of the issues that you face and ensure that you get justice. Sometimes, your credit score will improve markedly, simply because one of the bureaus has made a basic mistake.
It’s not hard for this to happen, either. A lot of people go through the experience of seeing their score tank and they don’t know why. It’s just a question of going to the right attorneys and getting them to figure out what’s gone wrong and how to fix it.
Diversify Credit Card Types
You can also try diversifying the types of cards you use and operate a mix of credit accounts. This approach shows that you’re not just relying on one form of borrowing and have more feathers to your cap, so to speak.
For example, taking out a home equity line of credit shows that you’re a property owner, so it makes lenders feel better about providing you with higher limits on your credit card. The same goes for when you’re closing older accounts.
Budget Well
Now getting onto the real lifestyle stuff, it also helps to budget well and live within your means. It’s okay to use a credit card for some purchases but not for others.
You can cut down on unnecessary expenses and fees where possible, and you can lower your existing debts if they are higher than they should be to maximize your credit score.
Once you change your credit utilization rate, you should notice that the numbers start to tick up. Many people get into the “excellent” range by using this strategy.
Limit Co-Signing Loans
You’ll also want to limit the extent to which you co-sign loans. When you do this you actually become equally responsible for the debt, which is a problem if the person behind it isn’t trustworthy or doesn’;t want to pay it back.
Sometimes, you have to co-sign, but it isn’t something that should be a major part of your life. What’s more important to your financial future is the ability to maintain a high credit score. If the other person doesn’t pay back the loan, you’ll be legally on the hook for it, so it is something that you’ll want to avoid where you can.
So there you have it: some lifestyle changes that will improve your credit score.
