In an age when most things offer some form of instant gratification, it may be surprising to learn there is no immediate solution when it comes to improving your credit score. It’s not quick, fast and certainly not instant. If you’re looking to improve your credit, you need to commit a decent amount of time and patience.
To put it in perspective, compare your credit to your health. If you decide you are going to live a healthier lifestyle, you are dedicating months, years and hopefully a lifetime toward reaching your goals. Practicing financial health is much the same. It requires a lifetime commitment that won’t offer instant results, but will pay off in the long run.
Also similar to practicing a healthy lifestyle, once you stop, you will lose all of your results quickly and have to work hard to get your credit score back in good standing. Good credit takes a long time to build and only a moment to go down.
Here are some ways you can start the process of improving your credit score:
1. Pay your bills on time
It seems simple, but we can’t stress enough how important it is to keep up with your bills, even the small ones. Services such as Marine Bank’s Automatic Bill Pay can assist you in making sure you pay your bills on time. You need to pay attention to the funds in your account though to make sure you always have enough when it comes time for the automatic withdrawal.
2. Don’t overextend yourself
The goal is to manage your debt and not let it manage you! You should not be spending more on your credit card than you’re paying off. When deciding big purchases or financial commitments, consider the long-term plan you will set in place to pay off your debt responsibly. Another trap people find themselves in is adding small purchases on a credit card after spending all of their cash on larger bills. This will slowly dig a deep hole of debt and ruin a credit score.
3. Keep 70% of your card limit available
A good rule of thumb is to keep 70% of your card limit available. People who pay their credit card bills on time are often surprised at how low their credit score drops when they have multiple credit cards that are maxed out with no available credit on them. Going over the 30% credit utilization ratio during any time in a billing cycle can potentially lower your score. This is because creditors can pull a report any time during the billing period making it risky to use more than 30% of your card’s limit at any point. In layman’s terms, this means that even if your credit card bill is paid on time each month, your credit score is still damaged based on the high amount that was owed.
4. Don’t apply for too many credit cards
Many companies use the strategy of offering an immediate incentive for opening a credit card with them. However, just because someone offers you an additional 20% off of your purchase, free gifts or even absurd amounts of online bonus points, it does not constitute a valid reason to open a credit card with them. Having too many credit cards will red flag you in the credit world and lower your score.
5. Apply for credit cards
This probably seems counter intuitive to the previous advice, but if you don’t have at least one credit card, you don’t have any credit which means you’re not improving your credit score. Having one credit card or even a few credit cards and using them responsibly will move your credit score in a positive direction. This doesn’t mean you shouldn’t open a credit card to your favorite store to collect their incentives, it means you shouldn’t open a credit card to every store to collect everyone’s incentives.
In theory, the concepts for improving your credit score are not difficult to understand. The key is putting them into practice over a long period of time. There is no quick fix to improve your credit. It takes years to build it up and only a second to bring it down. That’s why you have to commit to leading a financially healthy lifestyle to see your credit score improve.
Written by: Brooke Thomas