A good credit score can open doors, from helping you qualify for lower interest rates to buying your dream home. Building credit is easier than you think—if you know where to start. As a federal credit union, our team at DEXSTA is here to help you get the score you need so you can earn the financial security you deserve. Follow these steps to improve your credit.
No matter what tips and tricks you hear from friends, families, and the web, you should always start at the very beginning by checking your credit score. Regularly checking your credit report helps you understand where you need to improve and how far you need to go.
You have three credit reports, one from each of the three major credit bureaus: Equifax, Experian, and TransUnion. You’re entitled to one free copy of all three credit reports every year under the Fair Credit Reporting Act. You can access your free credit reports at AnnualCreditReport.com, a government-mandated site run by the “big three” credit bureaus.
Your credit score will exist within a range of 300 to 850. The tiers typically break down as follows:
Does your score sound right? Credit reports can, and frequently do, have errors in them. A 2012 study from the Federal Trade Commission discovered that 20% of consumers had an error on at least one of their credit reports. Once you check your credit report for inaccuracies, you can submit a dispute to try and clear them up.
The biggest factors affecting your credit score are payment history and credit utilization. Together, these two represent up to 70% of your credit score. Payment history tracks how reliably you pay your bills, while your credit utilization ratio divides your total credit card balances by your total available credit to determine your creditworthiness.
The good news is that improving your payment history score is quite straightforward. While paying bills late or settling an account for less than you agreed can negatively affect your score, paying all your bills on time monthly will drive up your score. However, many people don’t realize that this includes more than just your credit card bills and student loans. Your rent, utilities, and phone bill can also affect your payment history score.
Today, there are lots of tools you can utilize to keep track of when your bills are due: you can use your phone’s calendar and alarms, apps like Trim and Mint, and even Google Alerts to stay on top. Likewise, online banking makes it easy to pay your bills on the go. If you’re confident in your income, you can even set up autopay on your accounts.
Lenders like to see credit utilization ratios of 30% or less. A low credit utilization score shows lenders that you aren’t maxing out your credit cards, which increases your credibility. It also proves to lenders than you can manage your money well.
Opening a new credit card will increase your overall credit limit, but applying for a card creates an inquiry on your report. While a handful of these are fine, keep in mind that too many could negatively affect your score. You can also improve your ratio by paying off any debt you have accrued and keeping your credit card balances low.
Remember, your credit score isn’t set in stone. At DEXSTA, we want to help you achieve financial freedom by improving your credit. To learn more about how you can improve your score and bank simply, please contact us.