I Want to Monitor and Improve My Credit Score
Your credit score is important if you ever plan on applying for a credit card, mortgage, auto loan or any other type of credit. The better your credit score, the better your terms and interest rates will be.
We talked in Credit Scores 101 all about how and why credit scores are created. But just what do you need to do to check your score and build your credit health over time? Here are some steps to get you started.
Check your credit score.
You can get your credit score for free at a few sites such as Credit Karma and Credit Sesame. In order to sign up for these services, you’ll have to provide some personal information, including your name, address and Social Security Numbers. At Credit Karma you’ll get a free credit score from TransUnion, one of the three major credit bureaus, as well as daily credit monitoring. They will email you when something important changes in your credit report. Also, get a sense of how you can improve your credit score by checking the site’s credit report card, which grades you on the different factors that influence your credit score, such as open credit card utilization or derogatory marks. (Read our 101 to find out about all the factors.) Credit Sesame provides your Experian credit score once a month and also has helpful tools like your current credit usage.
Clean up your credit report.
Up to 25% of credit reports contain serious errors that can affect your credit score. Before you apply for credit, make sure your credit reports are error-free by checking all three at AnnualCreditReport.com. (If you’re not applying for credit soon, you should check all three over the course of a year, as we suggest in this checklist.) If you find an error, follow the steps outlined here to clean them up.
Automate your installment loan payments.
Installment loans are credit accounts that you make regular payments on, like a mortgage or car loan. If you miss a payment, it could affect your credit score. And bills that remain unpaid can eventually be sent to collections, which will negatively affect your credit score and make it difficult to get approved for credit in the future. Make it easy on yourself by automating these consistent payments through your bank’s bill pay system.
Automate or set up calendar alerts for your credit card payments.
If you’re confident you can pay your credit card bill in full every month, then go into your credit card account and set it to pay the total amount due every month. However, if you’re worried that the automatic payment might overdraw your account, instead of automating your payment, you can set up a calendar alert to remind you to pay your bill ten days before it’s due. That’ll give you enough time to schedule your payment early.
Ask for a credit limit increase.
This is a little advanced, but it can help boost your score. We talked about your credit utilization rate and how it affects your credit score in Credit Scores 101. One way to make sure your balances are always less than 30% of your limits is by having high credit limits. Most credit card companies will automatically review your limit and increase it every six months or so. If this hasn’t happened recently, you can call up your credit card company and ask for an increase. Just keep in mind that this could initiate a hard inquiry on your credit.
Think before closing old credit card accounts.
Sometimes, closing an old credit card account can do more harm than good when it comes to your credit score. If the account has a high credit limit, closing it can greatly increase your credit utilization percentage. Plus, if it’s one of your oldest credit cards, it’ll reduce the length of your credit history, another important factor in your credit score. However, closing a card that charges you a high annual fee and doesn’t give you good rewards can be a good idea.
Check your score again each month.
Creditors—like your credit card company or mortgage lender—report activity to the credit bureaus once each billing period. That means that new balances, paid-off accounts or delinquent accounts can take a full 30 days to impact your credit score. Checking your credit score more often that once a month isn’t necessary, but it’s a good idea to do a quick check-up monthly.
Performing these tasks should put you on the right path toward a good credit score. That way, when it’s time to apply for a loan or credit, you’ll know where you stand.