Your credit history is a record of how well you’ve shown you can pay back debts – including info on how long you’ve had accounts, how much you’ve owed, whether bills were paid on time, and other factors. This info in your credit history is used to calculate your credit score. Now for some real talk: your credit score can have a big impact on your life. It can impact whether you get approved for a loan, how high your interest rates will be, and other factors that can affect your financial life. So, if your credit score isn’t where you’d like it to be, give these helpful tips a try to improve it.
1. Pay Down Your Credit Card Balances
One of the most significant factors used in calculating your credit score is your “credit utilization” or "credit utilization ratio". This is the money you owe on your credit cards and loans divided by your total credit limits. For example, if you have a $1,000 limit on a credit card and have used $300 of it, you have a 30% ratio or credit utilization. Typically, the lower this number is, the better. The best scorers pay off their credit card bills in full each month, meaning they have low credit utilization. That means the less of your allowable credit you need to use, the better your credit utilization is. Some companies provide trackers so you can monitor your current ratio. To lower your ratio, pay down your balance before your next card statement. Another easy way to get your utilization ratio under control is by making more than one monthly payment. Then, keep the balance low once you’ve paid it down. As soon as your credit history reflects the lowered balance, it will benefit your score, so this tip doesn’t take much of a time commitment, but still requires some discipline.
2. Become an “Authorized User”
Sometimes people have lower credit scores because they just don’t have enough credit history. If your credit history is a little skimpy, becoming an “authorized user” can help beef up your score. Ask your friends or relatives if they have a good and established credit history, make their credit card payments on-time, and would be willing to add you as an authorized user to their credit profile. This puts their card on your credit report, and its limit helps your credit utilization ratio. Some people call this “credit piggybacking.” You don’t even need to use your friend or relative’s card to benefit from this. They don’t even need to give you the account information if they’re worried about you using it (but you probably shouldn’t be piggybacking on somebody who doesn’t trust you!). As soon as you are added to the account, it should appear on your report. After becoming an authorized user, you would request that the card be reported to all three major credit card bureaus. This will give you the biggest impact and could be a major, and majorly fast, game-changer for you.
3. Make All Your Payments On Time
Even if you do all the other tips on this list to a T, it won’t matter if you don’t make your payments on time each month. Just one late payment can have a big negative impact on your score and stay on your account for up to seven and a half years. On the other hand, everyone gets into a bind at one point in their life or another. If you miss a payment by 30 days or more, contact your creditor immediately. They can sometimes make arrangements with you that can help catch the account up. Every month that your account is late hurts your credit score, so making payments on time every month is the key to boosting your score. The longer you make on-time payments, the more your score keeps improving.
4. Dispute Credit Reporting Errors
Even credit bureaus make mistakes sometimes. You can request a free credit report from each of the three bureaus once a year. When you request a copy of yours, be sure to inspect it for any errors, mistakes, or miscalculations. You can remove it from your credit profile if you can verify that anything was an error. In some cases, you can have a late payment removed from your credit history. The impact of removing a late payment from your report is huge. These corrections, however, can take time to be reflected on your account. The bureaus have 30 days to investigate and update your credit profile.
5. Open a Secured Credit Card
Don’t have ANY credit history yet? Or maybe your credit score isn’t all that great? Either way, a secured credit card might be the way to jump into the credit waters. A secured credit card is a card where you set your own credit limit by making a cash security deposit when you open the account. It can be a great starter-card as you gain experience with the best ways to use a credit card and learn how to continually make your payments on time each month. The GO2bank Secured Visa® Credit Card is great for helping you get your credit sea legs. With no annual fee1, no credit check2, credit limits starting ats low as $100, and monthly credit reporting to the 3 major credit bureaus, it was built to help credit beginners get their credit going.
And when you sign up for autopay on your GO2bank Secured Visa® Credit Card, your payments will be automatically deducted from your GO2bank account on the date you choose. Setting up auto pay is fast and easy, and it helps you keep making your payments on time, the key to building good credit.
No matter where you are on your credit building journey, we’re here to help. Learn more about how we can help.
The views and opinions expressed here may not represent the views and opinions of GO2bank, Green Dot Corporation, or its affiliates. It is presented for general informational purposes only and does not constitute tax, legal, or business advice.