Did you know that only 10 percent of Americans know their credit score? Those are the findings of a survey commissioned by TrueCredit.com, a web subsidiary of the credit bureau, TransUnion. In general, there’s a lack of financial literacy in our country, so this isn’t a shocking statistic. Still, by not knowing your credit score or how credit works, you can lose a lot of money. Have you heard the saying, “Ignorance is Bliss”? When it comes to your finances and your credit, ignorance is expensive.
When you apply for credit, your credit scores help lenders determine whether or not you are able to repay the loan based on your past financial performance. With a higher score, you qualify for better interest rates, higher credit limits, and more types of credit than you would with a lower score. Your score reflects the way you use credit, and there are no tricks or quick fixes to getting a good score. However, you can raise your score over time by demonstrating that you consistently manage your credit responsibly. Here are eight things you can do to improve your credit scores.
1. Pay your bills on time. If you have a history of paying your bills on time, you’ll have an easier time getting a mortgage loan, car loan, or credit cards. Even if you’ve had serious delinquencies in the past, a recent history (24 months) of on-time payments carries weight in credit decisions.
2. Keep credit card balances low. High outstanding debt can pull your score down.
3. Check your credit report for accuracy. Always contact the original creditor and the credit bureaus whenever you clear up an error so that the inaccurate information won’t reappear later.
4. Use credit cards—but manage them responsibly. In general, having credit cards and installment loans that you pay on time will raise your score.
5. Don’t open multiple accounts too quickly, especially if you have a short credit history. This can look risky because you are taking on a lot of possible debt. New accounts will also lower the average age of your existing accounts which is something that your credit score also considers.
6. Shop for a loan within a focused period of time. Credit scores distinguish between a search for a single loan and a search for many new credit lines, based in part on the length of time over which recent requests for credit occur.
7. Don’t open new credit card accounts you don’t need. This approach could backfire and actually lower your score.
8. Contact your creditors or see a legitimate credit counselor if you’re having financial difficulties. This won’t improve your score immediately, but the sooner you begin managing your credit well and making timely payments, the sooner your score will get better.
These ideas won’t create a dramatic improvement in your credit score overnight, but over time, they will. And while you can’t get a retirement loan, any interest that you’re able to save off of your other loans can go a long way towards building your wealth for tomorrow. If you’re wondering about your credit and the loans you’re currently paying, head over to Afena. Even a small adjustment in interest rates can really add up, and that’s money you can set aside for a debt free retirement.