Your credit score just may be the most important number in your financial life. If you have a stellar credit score near the top of the scale, you will automatically qualify for the lowest available mortgage rate and the lowest possible interest rate when you buy a new or used car. If you are at the other end of the spectrum, you may find it difficult to qualify for a mortgage at all or convince a lender to loan you the money you need to put you on the road.
A low credit score could even make your car insurance more costly. Some car insurers pull credit reports and take credit scores into account when setting rates, so you could pay more even if you have a stellar driving record. A poor credit score could even cost you a job, since some employers also look into your credit history when evaluating their job candidates.
If you have dinged your credit score, there are some things you can do to recover.
Pay on Time
The best way to get your financial life back on track and start building your credit score is to pay your bills on time month after month. A consistent history of on-time payments is the absolute best way to boost your credit score.
You can make on-time payments easier and your life less stressful by recording the closing dates of all your credit cards and setting reminders to make the payments. If you receive electronic statements from your credit card issuers, be sure to check your spam filter and make sure the messages come through. By setting a reminder, you will know to be on the lookout for the bills as they come in.
Pay Down Balances
Whenever possible, pay more than the minimum balance due. Ideally you want the amount of debt you owe to be no more than 30% of the amount you could possible borrow. For example, if your credit card has a $1000 limit, you want to try to get your balance below $300. At that point, you'll start to see a boost in your score.
Avoid New Credit
You can also boost your credit score by not applying for credit you do not need. Your credit score can be impacted by opening new credit card accounts. If you do not need another credit card, you should resist the urge to open a new account. A large number of new inquires in your credit report could also lower your credit score.
Check Your Credit Report
It is also important to look carefully at your credit report and check it for errors. The credit history reported by the major credit reporting agencies plays a big role in determining your numerical credit score. If there is a mistake in your credit report, that error will be reflected in a lower credit score. Contacting the credit reporting agency and removing the erroneous information in your credit file can boost your score substantially.
Read more about Credit Scores and Reports here.
