Ways to Improve Credit

Have you ever wondered what you could do to improve your credit? Whether buying your first home, or seeking a lower interest rate on a car loan, credit can be an essential tool for meeting those financial goals. Here we’ll take a closer look at all aspects of credit and share resources to help you on your journey to improve your credit.
 
 

Getting a current credit report

What is a good credit score? A good credit score is part of a credit profile that gives you access to affordable credit when you need it without increasing financial stress. A credit score is the basis of a person’s ability to borrow and is a number ranging from 300 to 850 calculated based upon your credit report. It tells lenders how risky or safe you are as a borrower.

When was the last time you reviewed your credit report?

• A credit report is a document with your full credit profile with items like credit score, payment history on debts, status of your credit accounts and other activity.
• Reviewing your credit report and finding, or correcting errors can be a crucial step to improving your credit. Previously, Americans were entitled to one FREE credit report per year via the credit bureaus Equifax, Experian and TransUnion.
  • It was recently announced – all three credit bureaus will be offering FREE credit reports on a weekly basis until after Tax Day 2022. This benefit provides a great opportunity for all Americans to review their credit report more regularly.
• There are many free resources such as AnnualCreditReport.com to get this information.  If possible, avoid using Google to search for "free credit report" as this may lead you to a site that will charge for your report. Go directly to AnnualCreditReport.com for a look at your credit report to see where you stand.
• If you do not have credit yet – rest assured – we’re here for you with support and resources to get you started.

 
 

Factors determining credit

To improve your credit, let’s break down the factors affecting credit:

• Payment history
  Accounts for about 35% of a credit score; the history of payments made on time, paid late, charge-offs, accounts in collection and more.

• Balances owed
  Accounts for about 30% of a credit score; the balances you still owe on your credit and how much of your credit is still available to you if you need it.

• Length of credit history
  Accounts for about 15% of the score; this is how long you’ve had credit.

• New credit
  Accounts for about 10% of the score; this is how many times you apply for additional credit.

• Types of credit
  Accounts for about 10% of the score; the different mixture of credit types you have like credit cards, an auto loan or mortgage.

 
 

Practice new credit habits

Consider practices like:

• Only opening new credit accounts as needed. Each time you apply for new credit it creates a hard inquiry on your credit decreasing your score.
• Change billing due dates and setting up automatic payments. Making regular on-time payments and changing payment due dates to align better with your personal situation may make payment history more manageable and help to improve your credit.
• Reduce the amount of debt you owe. Work on keeping credit card balances as low as possible.
• Decrease spending. Find ways to cut back spending while seeking to improve your credit, high outstanding credit card debt can negatively impact your score.

 

Virtual Financial Coach

Try out our Virtual Financial Coach you should see a pop-up up on the bottom right of this page.
The Virtual Financial Coach can provide personalized advice, a customized action plan and follow up communication to check in on your progress. 
 
 

Ways to manage credit

• Managing credit, reducing payment obligations and finding ways to manage debt is something many of our members are thinking about right now. Check out our previous post which includes some additional information on options to consider to help your credit and manage debt obligations Rework Bills & Manage Debt.

 

Webinar on 5 tips to improve your credit score

• Watch a webinar by our partners at GreenPath that focuses specifically on the five factors on which a credit score is calculated, and provides practical advice you can use to make the most out of your credit score. Watch Now

All of the above are important things to consider in improving and maintaining your credit score. Remember, Rome wasn't built in a day and the same can be said about improving one’s credit. It takes patience, time and persistence to improve credit – we’re here to help.

For help on ways to improve your credit – stop by your neighborhood Financial Health Center. If you do not have any credit yet, we can help you determine the best way to start building based on your goals. If you haven’t yet reviewed your credit report this year, or need support retrieving your credit report we have got you covered. We can help you retrieve your credit report from www.annualcreditreport.com and work with you on options like paying your highest-interest debt first.