The difference between a good credit score and a mediocre one can be the difference between paying hundreds of basis points of extra interest each and every month; depending on one’s current and future need for debt, this can meaningfully impact one’s cash flow and living situation, making managing one’s credit score an important task. Here are three tips to help in the quest for higher credit scores.
Pay Bills On Time
Payment history is the most important component of credit scores; missing just one or two payments can impact a credit score more than debt utilization ratios or length of credit history, other factors one needs to consider.
Try setting up automatic payments for credit cards/lines that provide the option.
Keep Credit Usage Reasonable
Next to payment history, the percentage of one’s credit that is used up, on average, every month is the next most important aspect of managing a credit score. If a borrower is consistently maxed out each and every month, a lender will assume new debt is more risky, as this person may be using debt to finance his/her lifestyle.
Keeping the amount one borrows to less than 30% of the total credit open is one way to improve a credit score in a meaningful way.
Try Secured Cards, Auto Loans if New to Credit
For those starting out, secured cards (those which act more as debit cards than credit cards) and auto loans are typically two of the easiest ways to get started, as these loan types typically require little to no credit to get started.
Invest wisely, my friends.
