Many of us know the value of a good credit score and do all we can to make this score stay as high as possible so that we can make large purchases like buying a home, purchasing a car, or planning our dream vacation. However, sometimes life throws us a financial curveball and our score goes down. Here are some ways to increase it:
Reduce Your Credit Utilization Ratio (CUR)
Your CUR is a way of referring to how much of a credit card’s debt limit you have used up. Here is an easy example to see how your CUR is determined. Let’s say you have a credit card with a limit of $1,500 and you have $1,300 borrowed on it during this cycle. When you do the math, you will see that you have used up 87% of your available credit. Having a lower balance on your credit cards decreases your CUR and helps increase your credit score. To find out if you have too much debt, use this calculator. You should aim to keep your credit utilization rate below 30% each cycle to lower the impact on your score. This may mean requesting a credit line increase or even getting an additional credit card if your credit utilization is too high every month. The most important thing to keep in mind when considering getting a new card is if you have the capacity to make sure you can keep up with it. Keep in mind increasing your credit line or getting a new card will impact your score in the short run but will impact your score less overall if your utilization hovers around 30%. Even if you pay it off each cycle, a high CUR is a sure way to get a hit on your score.
Review Your Credit Reports For Errors
You are entitled to receive one free credit report per year from each of the three major U.S. credit reporting agencies – Equifax, Experian, and TransUnion. Set a calendar reminder to get your free report from each of these agencies and look over them thoroughly. Some people may have an error on their credit report and 5 percent of Americans endure errors so serious that they are likely being overcharged for credit card debts, auto loans, insurance policies, and other financial obligations. Review your credit report to make sure you are not part of this statistic. Some organizations can check your credit score without pulling a formal report, called a “hard inquiry.” These organizations will estimate your score by doing a “soft inquiry” and it does not impact your score to check these regularly. To learn the difference between a credit report and a credit score, check out this explanation here. Common examples of hard inquiries that can lower your score are pulling your credit report, requesting a loan, credit card applications, apartment rental applications, and utility applications. When done in a short amount of time, these can decrease your score because you are asking to take on more financial responsibility.
If You Have Been Doing the Right Things, Tell Your Creditors to Report Them
If you fail to pay your bills, your creditors will let the major reporting firms know. However, if you are diligent about paying your bills, the same does not always hold true. Quite often, good behavior goes unrecognized by certain creditors while bad behavior gets a quick red flag. Urging a creditor to report the things you are doing right to the credit reporting firms can help your credit score increase.
While you should not focus too much of your time and effort on your credit score, the above-mentioned steps are some simple things you can do to help increase it.
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