5 Easy Ways to Boost Your Credit Score
By Sarah Kaufman | Manilla.com
Building credit takes time, but it’s never too early to start practicing responsible spending and money management habits that can lead to a boost in your score. Follow these five easy tips to ensure your credit stays high.
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1. Make on-time bill payments.
One of the best things you can do for your credit is to pay your bills on time. While one or two 30- to 60-day late payments won’t have too much of an impact, just one 90-day late payment can damage your credit for up to seven years. To ensure you always make on-time payments, use an account management and bill reminder service, such as Manilla.com, which will remind you when your bills are due. Not only will this help keep your credit score from dropping, but it will also help you save money on late fees, which can cause your bank account to take a hit if you’re not careful.
2. Keep your credit utilization ratio low.
You may have heard before that closing a credit card can negatively affect your credit score, but there’s a reason for it: It can cause your credit utilization ratio to skyrocket. You should keep your credit utilization ratio, which is the percentage of your credit limit that you actually use, at around 10 percent, according to FICO.
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Here’s what closing a line of credit could do to your utilization ratio: Let’s say you have two credit cards: One has a $5,000 limit and the other has a $10,000 limit. Each month, you use your credit card for about $1,500 worth of expenses, which brings your utilization ratio to a safe 10 percent. However, you decide that because you never really use the card with the $10,000 limit, you’re going to cancel it, but you don’t change how much you’re spending each month. Now, your credit utilization ratio has jumped to a whopping 30 percent, which can cause your score to drop.
3. Monitor your credit report.
Consistently check your credit report for any errors that could be affecting your credit. Checking regularly will also help you catch any fraud or potential identity theft.
4. Pay off your credit card balance in full each month.
Your credit card should be used as a way to build credit, not to spend money you don’t have. It’s important to pay off your balance in full each month so you don’t spend more in interest over the long term. But, if you’ve amassed a large amount of credit card debt and you’re unable to pay off the balance in full, make sure to at least pay the minimum balance due on time each month.
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5. Re-examine your budget.
Revisit your budget at least every six months to see if there’s room to put more money toward paying off your debt, which can help improve your credit.
Sarah Kaufman is a regular contributor to Yahoo! Finance, Good Housekeeping, Woman’s Day, Redbook, The Motley Fool, and other sites.