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The importance of your credit score cannot be overstated because it is one of the most essential financial metrics in your life. Homeowners, loan providers, potential employers, insurers, and just about everyone else you hope to do business with all review your credit report. A good credit score can open doors for you, while a low score can make life much more difficult.
The good news is, if you’re not happy with your current credit score, it’s not set in stone. There are ways to improve your score so that you can get a wider choice of loan options and more easily find companies that want to work with you.
Personal finance expert Suze Orman has suggested some tips for improving your score. Here are some of his tips.
Make all your payments on time
First of all, Orman stresses the importance of always paying your bills on time. As she points out, this is the most important factor that credit reporting agencies use to determine your credit score. “You have no excuse for not being successful,” Orman says on his blog.
This is especially true since virtually all credit card companies allow you to set up automatic payments. If you sign up for at least the minimum payment to be taken directly from your bank account each month, you won’t have to worry about forgetting a payment and seriously damaging your score because of it.
Spend less on your credit cards
Orman’s next big tip is to use your credit cards less. She suggests that you charge only a few items each month and then pay off your entire balance.
However, while Orman is correct in saying that keeping your credit usage (the amount of credit used versus how much you have) below 30% is an important factor in improving your score, his advice in this regard. case could mean limiting the potential rewards you earn. If you can budget responsibly and make sure you have enough money to pay off your bills in full without paying interest, there is little reason not to charge all you can and just pay off the debt immediately. after you have obtained the maximum possible rewards based on your spending.
Orman advises avoiding store cards to help improve your credit score, both because store cards have very high interest rates and because opening a new card at checkout can result in a new investigation on your credit report. Too many inquiries will lower your credit score. This is generally good advice, as store cards also tend to have lower rewards programs than other card options.
Keep an eye on your credit report
Finally, Orman invites you to regularly check your credit report. This allows you to spot errors that could hurt your score early on to minimize the damage they cause. It can also help you determine how your borrowing and repayment behavior is affecting your credit score. It’s especially important to keep an eye on your credit report as you work out to improve your score.
Normally, you can request a free copy of your credit report from each of the three major bureaus per year. However, during the pandemic, bureaus made weekly credit reports free for everyone.
Don’t forget to pay off your debt
While these are all great tips, Orman doesn’t put much emphasis on paying off your existing debt balances in these tips, which could be crucial if your score is currently being damaged by a high credit utilization rate. . It may also be possible to increase your score by asking creditors to remove negative information.
Nonetheless, taking Orman’s advice can go a long way in improving your credit history, and it’s worth listening to his advice if you’re hoping for an increase in your score that will improve your overall financial situation.
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