Having a good, even sterling, credit score is an absolute must if you need to purchase anything of value, such as a car, or house. A credit score can also mean the difference between paying $60 for your monthly auto insurance payment and paying $66. It may not seem like a credit score would make much of a difference in that arena, but it does.
So if your credit score’s not the best, what is the fastest way to improve it?
Reduce Your Utilization.
What does this mean? Credit bureaus define this as how much you have outstanding on revolving trades—in other words, a credit card balance, divided by your credit limit. If you have a $10,000 limit on a card, butowe $10K, then that’s your utilization. It essentially means you’ve maxed out your card. There are two ways to reduce your utilization: pay down your debt, or open a new, unused revolving acccount.
Other Ways To Bring Up Your Score
1) Get a Credit Card — But Be Responsible. A couple pieces of plastic in your wallet can help towards getting your credit score where you want it, but do be responsible with it and pay back the money on time.
2) Get a Secured Card. If you can’t get a regular card, which is unsecured debt (meaning there’s no collateral, as in a traditional bank loan), get a secured card that has to report to all three credit agencies.
3) Become an Authorized User. Say you can’t even get a secured card. You can request to be an authorized user on someone else’s card, perhaps a friend or relative. If you have something of a spotty credit history, you might hear the word “no” a lot, but on the other hand, if you have no credit history whatsoever, this is a perfect way to learn how to be responsible with your money, and with credit.
4) Under-use Your Cards. Credit card utilization should be no more than 30%, even less being ideal. 10% will maximize your credit ratio. For example, if your credit card has a $3000 limit, but you regularly charge 2000 of that, it won’t matter if you pay it all off, The Credit Bureaus will think you’re a spendthrift, and your score will go down.
5) Don’t Close Any Cards. Believe it or not, this can make your rating drop, and I can actually look bad to the credit bureaus. Keeping a card active for, say, paying a certain kind of bill is often recommended.
There are many other ways to get your credit core up fast, but these are the ones that are tried-and-true, especially if you’re looking to build credit initially, or rebuild it at some point. Reducing your credit card usage to about 10%, or no more than 30% is a good rule of thumb to follow, and of course, keep tabs on your credit by asking for a free credit report from all three credit bureaus. You’ll be glad you did.