If you’re someone who is new to building credit or has some experience developing your credit score, but you don’t quite understand what to do to increase your score, you’ve come to the right place! After reading this blog, you will have an understanding on how you can increase your credit score.
Step One: Pay your bills on time– We cannot emphasize enough how important it is to do so. This shows how reliable and trustworthy you are. When banks see that you cannot handle a simple task such as paying on time, they see you more as a liability than an asset.
Step Two: Apply for and open new credit accounts only when necessary– It’s ok to open a new credit card, as this is a way to increase your overall credit limit. On the other hand, you should understand that applying for new credit creates a hard inquiry on your credit report. When you apply for several new credit lines, the accumulation of these hard inquiries will significantly decrease your overall score.
Step Three: Pay off any debt and keep credit balances low- Have you ever heard the expression “just because you have it, doesn’t mean you should use it”. This relates well with the topic at hand. Just because you have $10,000 worth of credit doesn’t mean you should you all of it. There’s something called “credit utilization ratio” that banks look at to see how responsible you are (30% is the sweet spot). This means if you’re given $10,000 worth of credit, you should aim to use no more than $3,000 of that credit. Maxing out a credit card is not the smartest thing to do.