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Monday, May 27, 2024

Five steps for improving your credit score

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Indianapolis Recorder’s Money Smart Week continues with Everwise Credit Union sharing strategies for improving your credit score.

Your credit score is a crucial part of your financial health. The three little numbers measure how likely you are to repay borrowed money.

The most commonly used credit score model, FICO, has a range of 300 to 850. An excellent credit score (800+) can open the door to large loans with better interest rates, employment opportunities, and more. On the flip side, a poor credit score (less than 580) can be a strong impediment toward building wealth, funding large purchases and finding gainful employment.

Here are 5 ways to boost your credit score.

  • Pay bills on time. Carrying an outstanding balance, and/or owing lots of interest, shows that you are not timely with your bills. Setting up automatic monthly payments helps avoid late payments.
  • Keep credit utilization below 30%. Credit utilization ratio is the amount of available credit you have and use. Keep your utilization under 30%. Consider accepting offers for increased credit – just don’t rack up huge bills by having all that additional credit.

  • Maximize credit card payments. Find ways you can trim expenses or bring in extra cash to maximize payments toward your debt. You can pay down debt using one of the debt-crushing methods. Showing the credit bureaus that you’re on track to pay off debt can improve your score.

  • Keep credit cards open and active. Building and preserving a healthy credit score requires owning a card or two and keeping them active.

To keep your cards active without an open balance, pay one fixed monthly bill, such as a subscription or membership, with your credit card by setting up automatic monthly payments for the bill and the credit card. This way, your cards will be open and active, and you’ll never have a late payment.

Be sure not to open multiple new credit cards all at once. New accounts or new credit lowers the average age of your existing accounts, and opening multiple accounts in a short period of time is considered “a risk” by reporting agencies.

  • Review credit reports. Make sure your information is accurate, and no accounts have been opened in your name without your knowledge. Get a free copy of your credit report from each credit bureau once a year at annualcreditreport.com.

    Remember that lenders, insurers, employers, and others can obtain your credit report to determine whether you are a good candidate. So, it is key to your financial wellness.

    Managing your credit card and debt responsibly goes a long way toward positively impacting your overall finances. Learn more strategies with a Credit Basics resource and our free online learning module about Credit Scores and Reports to find out more about how credit is measured and the impact it can have on your financial goals. Catrina Tate is vice president of Retail at Everwise Credit Union with more than 21 years of banking experience. Visit everwisecu.com

    For more news courtesy of the Indianapolis Recorder, visit our homepage.

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