When it comes to credit scores, a true quick fix is all too rare. While that might be disconcerting to hear, it doesn't mean all hope is lost. Improving your score basically boils down to two things: following good credit practices and time. While you don't have any control over time, you can control the credit practices you choose to employ. Incorporating these three smart credit habits into your life can help build your credit.
1. Pay Your Bills On Time
Your payment history is the most important factor in your credit score – which means it's hugely important to pay on time. Even if you can't pay the balance on your credit cards in full every month, for example, being punctual with at least the minimum due shows that you're making an effort to pay back your debt. (This calculator can help you figure out how long it'll take to pay off that credit card.) Late payments can do serious damage to your credit score, so if you find yourself struggling to remember due dates, try setting up automatic payments online. Most credit card companies offer a variety of payment options to help fit your particular needs.
2. Keep a Low Balance on Your Credit Cards
Another major factor of your credit score is your debt amount — including your credit utilization, which is a metric that determines how much of your available credit you're using. This is determined by dividing your total credit card balances by your total open credit card limits. Creditors use this as a benchmark to determine lender risk; someone who consistently maxes out their credit cards or uses too much of their available credit will typically have greater difficulty paying it back. Optimally, try to never use more than 30% of your available credit at any one time and avoid maxing out your cards altogether.
3. Know What's on Your Credit Report
There's always a chance that a poor score could be the result of an error on your credit report. Your report shows what lines of credit are currently out under your name, how many credit inquiries you've had, and information regarding your public record and collections. Checking your report every several months can help you catch those mistakes so you can take steps to correct them and protect your credit. You can get your credit reports for free every year from each of the three major credit reporting agencies through AnnualCreditReport.com. You can get a free credit report summary every month on Credit.com to watch for important changes.
Remember, building credit is going to take a lot of time and diligence. While it might be a bit of a struggle though, the impact it will have on your financial life is huge. Try to keep the end result in mind when curbing your poor credit habits and the process should be a whole lot easier to handle.
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