When you’re looking to buy a home, car, or any other big ticket item, it’s important to have a good credit score. It’s like a resume of your financial activity.
Financial institutions, lenders, and even employers look at it to understand how you handle your money. A good score can save you money. A bad score makes it harder to get credit. A high score tells lenders you’re not a risk. This can get you a lower interest rate.
Fortunately, it’s easier than ever to track and protect your credit score. Read below to discover how to get started today.
Not All Reports are the Same
Here’s something you should know about credit reports: they can vary. Online credit repositories like Equifax, TransUnion and Experian use different scoring systems to calculate your score. It’s not uncommon for your score to differ significantly between them. Popular free scoring simulators like Credit Karma or Experian use calculations to mimic traditional credit repository scoring factors, but don’t always match the exact credit report scores. Don’t be afraid to check your score in multiple places to get a more accurate view of your current score.
Keep Your Starter Cards Open
You have to start somewhere. For credit cards, that usually means high-interest rates and low credit limits. It’s tempting to close your “starter card” when you get a new card, but keeping it open could improve your credit score. Length of credit history makes up 15 percent of your credit score. Keeping those older cards open can help boost your score.
What you don’t want to do is open new accounts to try and increase your available credit. When you apply for new credit, the lender looks up your credit information. This inquiry is sometimes called a “hard pull”. This can cause a slight drop in your credit score. Applying for several new credit accounts or loans could lower your score.
Keep Credit Use Low
Keeping a low balance on your credit card(s) and quickly paying off loans doesn’t just save you on interest charges — it also boosts your credit score. Your “revolving availability” of credit is a significant factor in your credit score calculation. By only using a small percentage of your available credit, you’re signalling to lenders and other financial institutions that you understand how to spend within your means.
Here’s a good rule of thumb: aim to keep your total debt below at least 20 percent (or, ideally under 10 percent) of your total available credit limits.
Set Up Automatic Bill Payments
Like many of us, you probably have several bills due each month. The gym, your cell phone, and of course your mortgage or rent.
Payment history is a major factor in calculating credit score. A single missed or late payment can have a significant impact. Automated payments guarantee you pay your bills on time every time. They also save you money by helping you avoid annoying late fees.
Protect Important Personal Information
Protecting your personal information is more critical than ever in the digital age. Your personal identification information unlocks many of your financial resources, making you vulnerable to identity theft. Cybercriminals can open lines of credit, make purchases, and transfer funds in your name. If undetected, this illegal activity can damage your credit score, leaving you with a costly, lengthy recovery. Take these precautions to protect your personal information:
- Shred bank, credit card, and other printed financial statements
- Keep important paper documents (like your Social Security card) in a lockbox or safe
- Sign up for online statements to avoid mail theft
- Only use secure, reputable websites when purchasing online
- Don’t click email links that ask for your password or social security number. Call the institution to confirm if the email is legit.
- Don’t access your bank, credit card websites, or apps using public Wi-Fi
- Never give out your PIN number or passwords
Read Through Your Credit Reports
Financial experts recommend checking your credit score regularly. You can request free copies online and search for anything out of the ordinary. If you do find a problem, report it to the credit bureau. Fixing these issues can take time so taking care of it quickly is important. Righting the mistake can boost your credit score and ensure your information is accurate.
These are just some of the ways to protect your credit score. A little effort could save you lots of time and money over the course of your life. If you have any questions about your credit score, our experienced team of bankers is here to help!