Tips to Improve Credit Score

How to Improve Credit Score

To begin, one of the first steps you can take to boost your credit score is to catch up on your current payments and pay them in full by—or before—their due dates. This goes for all lines of credit, including credit card bills, mortgage payments, and whatever else might be reported.

Credit Timeline

If possible, you should refrain from taking out a new line of credit for at least six months before applying for auto financing. Types of credit include lines for your student loans, another credit card, or something else.

How to Develop Healthy Credit from the Ground Up

However, if you’re beginning to build credit for the first time or are starting over again from scratch, you’ll need to open new lines of credit. Secured credit cards are a great option for future car buyers eager to demonstrate their financial responsibility.

What Are Secured Credit Cards?

First, you’ll put down a refundable security deposit that will serve as your credit limit. After you’ve shown you can reliably repay your credit—often for up to a year—your security deposit will be returned. Then, you’ll walk away with a higher credit score than when you started.

What to Do Next to Improve Your Credit Score

In addition to the tips mentioned above, you should also keep your current lines of credit open, even if you use them infrequently or no longer use them at all. This will reflect better in your overall credit score and help you achieve your goals quicker.

Understanding Your Utilization Ratio

As you move forward in this process, you’ll also want to be cognizant of something known as your utilization ratio. This means the amount of credit you choose to use in relation to your credit limit.

Strive for Below 10%

If you’re able, try to keep this utilization ratio below 30% and ideally less than 10%. For example, if your credit limit is $5,000, you should aim for no more than $500 worth of credit utilization at a time.