The new year is a chance to start fresh, especially where your finances are concerned. If improving your credit health is one of your goals, the moves you make now could set the stage for a stronger credit score by year's end.
Building better credit is a big task, and it helps to break it down into manageable steps. Focusing on just one credit-boosting move each week throughout the month of January can keep you from feeling overwhelmed.
Week 1: Check your credit reports and score
Your credit report lets you see what's helping your credit score, and what might be hurting it. Things that are good for your score include:
- A history of on-time payments
- Low balances on credit cards
- Using different types of credit
- Older credit accounts
- Infrequent inquiries for new credit
If your report shows a late payment or two, or several maxed out credit cards, those things could work against your score. Reviewing your report can give you some insight into what you may need to work on.
You can get a copy of your credit report from each of the three major credit bureaus through https://www.AnnualCreditReport.com. Remember that Barclaycard Ring™ Mastercard® members get free access to their FICO® credit score, for easy score tracking from month to month.
Week 2: Erase credit reporting errors
Your credit report includes a lot of information about your credit accounts, including your balance, payment history and credit limits. But sometimes that information isn't accurate. According to a Credit.com survey, 24% of Americans believed they had at least one error on their credit report.
Errors or inaccuracies can hurt your score if they include negative information. For example, one of your creditors might not be reporting your payments properly, or an account that belongs to someone with a similar name may be listed on your credit report.
Fortunately, you have the right to dispute these errors. All three bureaus (Equifax, Experian and TransUnion) let you dispute credit reporting errors online. The credit bureau is required to investigate the dispute and correct or remove any errors, if found. Having errors removed or corrected could give your credit score a positive nudge.
Week 3: Put your payments on auto-pilot
Late payments can be the biggest credit-score killer. Paying your mortgage late, for instance, could lower your score by up to 100 points. In a hectic world, it's sometimes difficult to stay on top of your due dates. Setting up automatic payments for your credit card and loan payments, or at the very least, scheduling payment reminders, can get you in the habit of paying on time, every time.
Week 4: Double up your payments
After payment history, the second most influential factor in credit scoring is credit utilization. This is a complicated term for something simple: How much of your available credit are you using at any given time?
When your credit card balances are close to or at their limits, your score can suffer. Putting a wider gap between your balances and your credit lines can help your credit health. Paying off a card or two in full is ideal, but may not be realistic for your budget. A simpler option is to make one extra payment each month.
The extra payment can be big or small, but the point is the same – to whittle away at what you owe. If your balances are steadily decreasing, your credit score can reap the benefits.
Week 5: Request a credit limit increase
Aside from paying down your balances, there's another way to potentially improve your credit utilization. Asking for a credit limit increase could give your score a bump, but there's a caveat: Don’t charge up to that new limit as soon as you get it. Doing that may not help your score at. It could very well hurt it.
Requesting a credit limit increase is often as easy as logging into your credit card's online account. You plug in your income and the credit limit increase amount you'd like, and you could have a decision in just a minute or two. If your online request gets turned down, you can always call your credit card company to inquire about your limit. That may take a little more time, but it could pay off if you're able to raise your credit limit and your credit score at the same time.
Small changes can yield big results
Improving your credit health doesn't mean you have to completely overhaul your financial habits. Setting up automatic payments, for example, is a relatively easy thing to do, but it could have a major impact on your credit score. As you ease into the new year, focus on taking small steps like these as you work toward your larger goal of better credit.
*All content provided in this blog is supplied by Rebecca Lake and is for informational purposes only. Barclaycard makes no representations as to the accuracy or completeness of any information contained in the blog or found by following any link within this blog.
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