5 Steps to a Better Credit ScoreBy Caitlin in Credit
A lot of us have maxed out our credit cards, however we think it’s time to max out our credit scores instead!
This guide will give you the best 5 ways to improve your credit score.
1. Pulling your Credit Score
Did you know that there are 2 ways to pull your credit score? Depending on the type of credit inquiry that you use, you might be hurting your credit score.
Pulling your credit score when you are applying for a loan can hurt your rating. This is known as a hard credit inquiry.
On the other hand, if you are pulling your credit for reasons other than obtaining a loan or if you are using a credit monitoring service then you are performing what’s called a soft credit inquiry and this will not hurt your credit score.
You should not have more than 2 hard credit inquiries in a 2 year period. This type of inquiry takes 2 years to fall from your report and you can start to see a few points shaved off your credit rating after 3 inquiries in a 2 year period.
2. Make sure you have at least one major credit card
Having a credit card is a great way to build credit history and slowly build up your credit rating. You can use it every month, just make sure you meet your payment deadlines!
If you have no credit history it is still quite easy to obtain a credit card. Most credit companies have programs for people in these situations (i.e. recent immigrants or students). You might not be given a large credit amount however it is still a great way to start building your credit.
If you currently have a bad credit score and do not qualify for a major credit card we strongly recommend that you apply for a secured credit card. A secured credit card works just like a regular credit card with one exception: you will have to leave a deposit before you are granted a secured credit card.
Depending on the type of credit accounts that you have affect your credit score differently. Real estate loans are the most important and have the largest impact on your credit, followed by installment loans (such as car loans, student loans, furniture loans and so on), credit cards and retail cards.
Your credit score will see more benefits if you are contributing to a real estate or installment loan than if you are trying to rebuild using retail cards or credit cards alone.
4. Keep old accounts open
Your credit length makes up for 15% of your credit score which is quite a significant amount. If you keep your account running it will continue to build credit history and this is definitely something that you want!
If your old account has a late payment or something of the sort you should still keep it open because either way you can’t escape your debt. By keeping it open you will at least see some credit history benefits and possibly a credit score improvement in the future.
5. Stay informed!
Do you know all of the factors that make up a credit score? They are:
– Payment History
– Credit Types
– New Credit
– Credit Length
– Amount owed
Read more about what makes up a credit score. By staying informed your future credit and loan decisions can be made in a more educated manner and you will see your credit score benefiting from your smart decisions!