Happy spring! After a long, cold winter we can now look forward to sunnier days, shorter nights and the feeling of new beginnings. This fresh season can inspire us to declutter the parts of our lives that have become stagnant during the colder months. Did you know you can turn the same type of attention towards your finances? For lots of us, the holiday season and start of a new year can leave us wading in credit card purchases we’re now struggling to pay back. This can leave us with a credit score a little less than perfect. Incorporating the following tips into your financial routine may help you boost (and maintain) your credit score this spring season, and for the following seasons long after!
What is a Credit Score?
USA.gov describes a credit score as, “…a number that creditors use to determine your credit behavior, including how likely you are to make payments on a loan.” They’re linked to a person’s credit card; these cards are a type of loan provided by a credit union or bank with a set spending limit that users have to pay back every billing cycle, plus interest. Credit scores are important factors when it comes to things like applying for loans, renting or buying a place to live, and getting insurance. If your credit score is too low, obtaining these things can become more difficult. That’s why it’s important to strive for a high score.
How Are Credit Scores Calculated?
Credit scores are calculated through the information found on a person’s credit report. This is a report with all your credit information that is provided by the three main credit reporting agencies: Equifax, Experian, and TransUnion. It’s on this report that you can find out your credit history, outstanding balances and payment history, among a few others. These details contribute to calculating your credit score.
What Is A Good Credit Score?
As Experian explains, “For a score with a range of 300 to 850, a credit score of 670 to 739 is considered good. Credit scores of 740 and above are very good while 800 and higher are excellent.” While credit scores can fluctuate from person to person, according to their research, about one third of consumers with credit scores have between a 600 and a 750. This sets them up with a good credit score for obtaining different financial services. Experian reports that the average credit score for American consumers is a 715, a score considered excellent, and one that has remained unchanged for the past 11 years. While it’s important to keep a credit score higher rather than lower, it’s important to note that you don’t necessarily need a perfect 850 to qualify for financial services.
How Do I Maintain A Good Credit Score?
Building a good credit score for yourself isn’t one size fits all. But, there are some general best practices you can incorporate into your daily habits to make it better.
Make Payments On Time
The first (and arguably most important) way to boost your credit score is to make your payments on time. This really makes a difference when you pay them on time, consistently. This can be done easily through automatic transfers when payments are due, as well as setting up electronic reminders for yourself each month. Having up to date credit payments are commonly the first place credit report agencies look when calculating credit scores. If you’ve fallen behind on your payments, make the effort to get current and stay current. Incorporating these payments in your monthly budget is a great way to keep bills regularly paid.
Long History Of Payments
While it’s true that everyone has to start somewhere when it comes to building their credit, it’s even truer that the longer you’ve kept your payments current, the better your score will be. A longer history of credit card payments further emphasizes to credit report agencies that a consumer can be trusted to pay their loans back, ultimately working in their favor to apply for other financial services. So don’t be discouraged about the process of boosting your credit score – sticking with your payment plan will work out in the long run!
Stay Away From Your Limit
Spending up to your credit card limit is commonly referred to as “maxing out”. Because credit report agencies look at how close you are to maxing out, this is something you should avoid if your goal is to boost your credit score. Generally you should keep your payment balances lower than the limit on your credit card. The Consumer Finance Protection Bureau says that, “Experts advise keeping your use of credit at no more than 30 percent of your total credit limit.” By keeping your spending at a reasonable amount, making payments towards your credit card can become easier and may boost your credit score.
Conclusion
Building and maintaining credit is an integral financial practice that can be easy to slip up on. But with smart financial practices, the effort to stay consistent and setting specific goals, anyone can boost their credit score and keep it at a number they’re satisfied with. If you still find yourself struggling to raise your credit score, you may benefit from our Credit Builder loan, specifically tailored to aid you on your journey to better credit. Schedule an appointment with one of our Loan Officers to get started today!
