If you’ve ever set up a credit card, you’ve likely heard the term “credit score.” This number helps creditors determine how likely you are to pay bills or pay back loans should you borrow money. This number can affect many aspects of your life, including your ability to rent an apartment, purchase the house you want, take out a loan or even buy a car. Having a low credit score can hold you back from reaching your full financial potential and accomplishing your goals. And while raising your score may seem like a huge hill to climb, there are a number of simple strategies you can use to help yourself get to the top faster.
As financial leaders, the members of Kiplinger Advisor Collective know how frustrating it can be to have a number dictate your future. Here, they share easy tips anyone can use to improve their credit score, build better financial habits and take back control of their money.
Keep your credit utilization ratio low
“An effective way to improve your credit score is to keep your credit utilization ratio low, which accounts for about 30% of your FICO score. There are a few ways to accomplish this. Use no more than 30% of your available credit and request credit limit increases on existing accounts, which can lower your utilization ratio if your spending remains constant.” — Hari Prasad Josyula, DowJones
Pay your bills (and your balance)
“A lot of your credit score is determined by ‘payment history.’ That just means, ‘Do you pay your bills on time?’ It represents 35% of your score. The second-biggest factor is how much you owe. If you carry hefty credit card balances, your score drops. That’s another 30%. Add them up, and it’s nearly two-thirds of your score. Focus on those two things, and you’ll be just fine.” — Howard Dvorkin, Debt.com
Take the 'piggyback' approach
“The single best way to boost your credit score quickly and easily is to ‘piggyback’ off someone else with great credit. Piggybacking is a strategy where you get added as an authorized user on another person's credit card. By doing so, you ‘inherit’ the other party's payment history. So, if you have a poor credit score, a so-so score or no score at all, piggybacking can help tremendously.” — Lynnette Khalfani-Cox, TheMoneyCoach.net LLC
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Create a budget to stay on track
“Avoid overleveraging yourself by doing a monthly budget. Everyone knows this, yet no one does it. Do not buy things you cannot afford.” — Justin Brock, Bobby Brock Insurance
Find lucrative ways to pay off your debts
“Paying down debt will improve your debt-to-credit ratio — an important factor used to determine your credit score. Take steps to make bigger payments to your credit card by cutting discretionary purchases, lowering monthly bills or finding a side hustle. Virtual tutoring or even pet sitting can be lucrative and easy through sites like Rover.com, which says you can make up to $1,000 a month.” — Andrea Woroch, Woroch Media Inc. / Andrea Woroch
Leverage the notes on your credit report
“Your credit score is calculated based on several factors that are not equally weighted. When you run a credit report through any major reporting agency, there are notes that usually indicate which areas you need to improve to raise your score. Read the notes and follow up. That is one way to raise your credit score quickly. But, remember: Credit is not an alternative source of income.” — Deborah W. Ellis, Ellis Wealth Planning
Avoid making purchases you cannot afford to make
“My advice is the old-fashioned ‘do not spend beyond your means’ advice. The convenience of credit cards can be tempting for people to just buy things left and right, even those things they do not really need just because they can put them on layaway. If you do not need it and cannot afford to buy it with cash, do not buy it. Your credit score will fix itself.” — Zain Jaffer, Zain Ventures
