A bad or a low credit score can impede your goals of financial independence more than you think.  Here are 5 quick tips to improve your credit score.

Sourced from: thefrugalengineers.com

 

A bad or a low credit score can impede your goals of financial independence more than you think. After all, your credit score can impact your loan, credit, and mortgage rates among others – which can affect how much you need to pay in the long run. So, if you’re looking for what to do while waiting to reach financial independence, make sure you include improving your credit score.

Many of us don’t think about our credit behaviors until we look at our credit scores (including me). In fact, The Ascent reports that those between 18 and 29 have the lowest average credit score of 659 – far below the 704 national credit score average. While there are no silver bullets in improving your credit score, there are some tips and tricks that can help you manage it better. Here are some of them:

1. Reduce the Number of Credit Cards

The fewer credit cards you have, the easier your credit is to manage. While opening more cards might increase your credit limit, it can also hurt you if you fail to manage them effectively. Building credit takes time and a lot of it has to do with having healthy money habits. For people who currently have a no credit history, we suggest you ask for a co-signer – whether they’re your parent, a friend or a partner. Leveraging someone else’s good credit practices can boost your own borrowing record until you can get a loan yourself.

A special note to parents: this process can be as simple as adding your children as authorized users on your credit cards to allow them to build credit from a young age.

2. Automate Your Payments

Not paying on time will hurt your credit score more than anything, and conversely, consistently paying your bills on time will raise your score in a few months. To do this, you can set a reminder on your phone or computer days before a due date. Similarly, you can directly automate bill payments with your bank, so you never miss a deadline. According to the credit scoring company FICO, your past due bills in credit cards, store retail cards, car loans, and mortgages are the most likely to hurt your credit score, so it’s best to get on top of it when you can.

3. Pay Attention to Your Credit Utilization

One thing you should be paying attention to is your credit utilization or the percentage of your credit limit that you use. You want it below the 30% mark, as numbers higher than this signal a higher risk of non-payment to the lenders. A quick fix to this is to increase your credit limit so you can have a lower credit utilization rate even if you spend the same amount in a given month. If that’s not an option, you can also pay every two weeks rather than once a month, this halves your credit utilization without compromising the amount you spend.

4. Longer Credit Relationships Matter

Your credit history length covers 15% of your FICO score. So naturally, you shouldn’t close your old accounts just because you don’t use them. Even if your old card has zero balance, keeping it open would serve to improve your credit score. The longer you keep your accounts open, the more your credit score increases.

5. Review Your Credit Report

This is the closest thing you can get to a quick fix when you’re repairing or increasing your credit score – check your credit report. On the surface, this gives you more control over the things you can improve on. But sometimes, it can lead you to the mistakes and miscommunications that might be affecting your credit score. You can spot fraudulent activities or dispute any wrong items on the report. Plus, it’s free. WisePiggy recommends credit score monitoring apps as the best way to make sure everything is correct, as you will get information direct to your phone.  We’ve partnered with myFICO for a discounted rate.

Building, repairing, and improving your credit score shouldn’t be that hard and complex if you become more proactive. Overall, it can save you a lot of time and, of course, a lot of money along the way.