How to Build Your Credit

Your credit score may seem like some mysterious three-digit number, but it can have a significant impact. Every time you apply for a cell phone, a car loan or an apartment, your credit may be checked. Which means that three-digit number can make a big difference on whether you’re accepted or denied. Your credit score can also be a factor in how much interest you pay on certain loans. If your score is lower, you might pay more interest. Without a solid credit score, you may find that getting approvals for your financial ventures is more difficult or more expensive.

But there are still some important ways you can boost your credit and overall score. We’ve consulted top experts on the matter and now we’re sharing their suggestions. While these recommendations won’t necessarily equate to quick credit, they are opportunities to improve your financial health. So, let’s get started!

1. Get Copies of Your Credit Reports

Forbes, a renowned financial magazine, suggests that you get copies of your credit reports and make sure they’re accurate. Recently, a Federal Trade Commission (FTC) study found that about 26% of all credit reports had an error. That’s about one in four people with incorrect credit reports!¹ 

Fortunately, it’s easy to get copies of your credit reports. The three leading credit reporting agencies are Experien, TransUnion and Equifax.¹ They collect your credit information from credit card companies, retailers, banks, auto and mortgage lenders and utility companies.¹ And they are required to give you a free credit report every 12 months.¹ All you have to do is go to AnnualCreditReport.com and fill out a simple form for each credit report you want.¹ Once you have a report from each agency, you can check them for errors. Forbes recommends you file a dispute with the reporting agency and the bank or lender connected with any inaccuracies.¹ 

2. Catch Up on Your Payments

The next recommendation comes from the credit reporting agency Experian. Since it’s their business to carefully track and report people’s credit, they know all about the subject. Their advice is to catch up on your payments. While it’s true that a late payment can stay on your credit report for up to seven years², bringing your accounts current will help your overall credit score. Plus, it stops you from having more late payments on your credit history and adding more late fees.² 

3. Pay On Time

Multiple trustworthy sources, including Equifax, Experian, Nerdwallet and Forbes all gave the same recommendation when it comes to your bills: pay them on time! This is one of the best things you can do when it comes to your credit health. In fact, 35% of your credit score depends on your payment history.¹ What this means is that one 30-day late payment could result in your credit dropping from “fair”  to “poor”.¹

Let’s say you find it difficult to keep track of deadlines. Don’t worry! You can usually set up automatic payments with your bank or lender, which will prevent you from being late. That way, you don’t have to fuss over meeting payment due dates every month. 

4. Limit Applying for New Accounts

Investopedia, which provides in-depth information on everything financial, cautions against applying for too many new accounts.³ Opening a new line of credit can lead to what’s called a hard inquiry, which can hurt your score.³ Hard inquiries may include applications for a new credit card, a car loan or a mortgage.³ Now, applying for a single credit card probably won’t do much damage, but applying for several of them in the span of a month will definitely have a negative impact.³ So, avoid applying for new accounts if you’re trying to improve your credit and your score. 

You’re More than a Number With Heights

With some expert advice, you can be on your way to healthier credit. Which means that three-digit number probably gets a boost too. This could help with everything from cell phone plans to applying for an apartment. Remember, these suggestions might not build quick credit overnight, but may improve your credit overall. 

Sources:

1. Forbes.com. “How to Improve Your Credit Score.”

2. Experian.com. “How to Improve Your Credit Score.”3. Investopedia.com. “How to Improve Your Credit Score Fast.”