Understanding Credit
Your credit score is one measure of your financial health and it influences your ability to secure loans and be seen as trustworthy by landlords or employers.
Accessing Your Credit Reports
Reviewing your credit reports helps you understand your financial standing and monitor for identity theft.
How to Improve Your Credit Score
Understanding the factors that impact your credit score can help you take control of your financial future. Here are the five main factors:
- Payment History (35%) Pay all bills on time. Consistently making payments on time is the most important step to improving your credit score.
- Credit Usage (30%) Keep your credit utilization low by paying down debt. Aim to use no more than 10% of your total available credit.
- Age of Credit Accounts (15%) Keep your oldest banking and credit accounts open. Closing long-standing accounts will shorten your credit history.
- New Credit Inquiries (10%) Limit applications for new credit accounts unless absolutely necessary.
- Credit Mix (10%) Maintain responsible credit accounts such as a mortgage or a credit card that you pay off in full every month. Avoid financial products that are difficult to understand or seem too good to be true.
Check for and Correct Errors
Reviewing your credit reports allows you to catch errors that might be lowering your credit score. If you find inaccuracies, such as incorrect debts or missed payments, you have the right to dispute them. Correcting errors can significantly improve your credit score, so it is important to review your reports carefully and take action if needed.
Be Consistent and Patient
Credit scores improve with consistent positive behavior over time.
- Pay your bills on time consistently.
- Avoid opening unnecessary new credit accounts.
- Manage your existing credit responsibly.
Negative marks like missed payments and inquiries will eventually fall off your credit report. Stay consistent and make responsible financial choices and your credit will steadily improve.