According to Experian, the average credit score in the United States is at an all-time high of 711. If you’re not sure what the credit score numbers are, here are the most recent breakdowns according to Nerd Wallet:
It’s likely you want good or excellent credit score. Maybe you want to get a lower interest loan for that new car. Or, perhaps your partner is tired of barreling into you in your super small kitchen and is begging you to go look at larger homes with them.
Or maybe you’ve just got that competitive spirit, so if “Excellent” is the highest credit score rating, you must have it!
Credit scores aren’t everything, but they are important in the world of finance and banking. Therefore, if you want to learn how to avoid boost your credit score, take some time to learn about what types of mistakes to avoid that would lower your credit score.
If you educate yourself on the matter, you’ll have a greater chance at building an even higher credit score, and potentially lowering your stress levels that can come from worrying about money.
You can order one free annual report from the three main reporting agencies: Experian, Equifax, and Trans Union. Check out what’s on there, as you may not even realize you have an error on your credit report.
Do some investigative work to see. If you find an error, contact the correct agency to find out how you can get it corrected. It also helps just to see what kind of credit blemishes you’re working with.
If you’re late on debt payments, it can negatively affect your credit score. Be sure to pay your debt before the due date and if possible, pay more than the due amount.
For example, if your house mortgage is $1000 per month, resist the urge to just pay that amount. If you have extra, go ahead and add $50 or $100 on top of that amount.
You’ll feel better mentally, because it just feels good to crush debt faster. Also, you’ll pay more toward the principal, ultimately saving you money interest-wise.
If you slack on paying your debt on time, your credit score will take a hit. Also, don’t forget to pay your income taxes on time. If the IRS puts a lien on your property, your credit score will drop.
When your relatives or friends ask you to co-sign an auto loan for them, you may want to resist. Let them know you appreciate them thinking of you, but you want to increase your credit score.
Co-signing can drop your credit score between 5 and 20 points. Of course, if it’s a dire emergency and they need your help, feel free to co-sign. The few points your credit score drops isn’t drastic enough to cause long-term credit turmoil.
Be sure you pay any unpaid fines, medical bills, and parking tickets. You may be able to make a payment arrangement, especially for medical bills. If your account gets relegated to a debt collection agency for unpaid fines, your credit score will drop 25 to 100 points, depending on what your credit score is.
The higher your credit score, the more your score will drop. If you can’t pay a bill in full, call the place of business and see if you can make payment arrangements.
“Would you like to save 10% today by signing up for our store credit card?”
It might sound tempting, but politely decline. You could potentially have five to ten new store credit cards within one month if you wanted. However, the high number of inquiries will end up hurting your credit score. This doesn’t mean you shouldn’t have any credit cards, but keep them to a minimum. And, charge responsibly.
If you have one credit card, go ahead and use it sometimes and pay the balance off when the bill comes. This helps your credit score grow little by little. Don’t max it out, as that will hurt your credit score.
Commit to making sensible financial decisions. There are so many people that get in over their heads when it comes to their mortgages or credit cards and kick themselves for it later.
Whether they get laid off, go through a divorce, a pandemic spans the Earth, etc., they wish they would have listened to their initial gut instinct and made wise financial decisions.
If you take a loan out that you can’t pay later down the road, it’s going to hurt your credit. Really think it through before agreeing on a loan amount.
Once you’ve graduated high school, you’re going to get invited by credit card companies to open a new credit card account. You’ll think you can handle it and it will be great for your credit score.
Think again. Most young adults max their credit cards out without one year of getting them, and then they can’t make the payments. Late or missed payments can really hurt your credit score, which is exactly the opposite of what you want.
Be patient. If you know you can have a credit card and will only use it sensibly and pay it off each month, then fine. But if you know you’re apt to make impulse purchases or you’re barely making it now week to week, you may want to hold off. There will be plenty of time later in life to open a new credit card account.
Boosting your credit score is possible. If you follow these tips, and are financially responsible, you’ll be alright. It may take some time, but you can incrementally grow that credit score number and feel proud of yourself for doing so.
Hopefully, you won’t need a lot of loans in your future, but if and when you do, you want to have a great credit score so that your interest rate is low. Low interest rates save you thousands of dollars over time, so do your best to follow these tips and keep your credit score growing.
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