Five years ago, a credit score of 620 was considered good. Today, a credit score of 760 is needed in order to get the best interest rates. There’s no better time to boost your credit score. Everyone has a credit score that is unique to them. It could range 300-850, and it changes as your financial situation changes. Creditors look to your credit score when considering giving loans or any other form of credit. Because of this, the higher your credit score, the better rate you’re going to get.
One of the most common ways to boost your credit score is to pay off credit card debt. It sounds easier than it really is, especially if you’ve racked up some serious debt. However, any amount over the minimum monthly payment will help pay it off since it goes directly towards principle (the overall amount of debt, not the interest.) When you pay off the credit cards, make sure to close them off if it is too tempting to keep them open. However, be sure to close the accounts at least 6 months before you apply for a loan or other type of credit.
Also, be careful of opening credit cards. Although opening store charge cards may seem tempting, every application drops your credit score from 5-10 points. This is because of creditors checking into your credit score. If there is a particular credit card you want, by all means go for it, just be able to judge the cards and make wise decisions.
Paying things early is another great way to boost your credit score. If you skip one payment, it can drop your credit score by as much as 100 points!
Although it might seem easier to ban credit cards altogether and live off of cash and your bank card, that isn’t always the wisest decision. While avoiding credit won’t hold you accountable for any bad credit, it also does nothing to promote good credit. The key is to use your credit cards wisely and make smarter financial decisions. If you accumulated a lot of credit card debt, figure out 2-3 credit cards you’d like to keep. For example, I’ve decided to keep my Discover card because it has the highest limit, and reasonable fees, etc. I’ve also decided to keep my Target store card, because they give me 5% off every time I use it and it’s only a $300 balance, so even at most it is easily paid off. Now, I know which cards I want to keep, I also know which credit cards I want to close. Making a plan is the first step towards raising your credit score.