This is a guest post by Kevin Craig. If you would like to write a guest post, please contact me.
A credit score is like a report card for adults. It’s a three-digit number that ranges from 300 to 850 that creditors, banks and insurance companies use to determine your credit-worthiness.
The better attention you pay to how you use your credit cards, the better your score is likely to be. If you have a lot of credit card debt and don’t pay your bills on time, your credit score will be bad. To get a high score, you need to carry low balances, only open new cards when necessary, and always pay your bills on time.
Now, if your credit score is currently low, be aware that it may take years to improve it. However, if rebuilding your credit score is one of your financial goals, then follow these steps to give it a boost:
- Go to annualcreditreport.com to get your credit scores from all three nationwide credit reporting companies: Experian, Equifax and TransUnion. You are entitled to one free annual credit report per year. Closely examine your reports to check for any inaccuracies. If you find discrepancies, investigate and resolve them.
- Open a credit card with your favorite retail store. The limits are often smaller, so you’re more likely to be approved, even with little to no credit history.
- Make your monthly payments on time. Whether you have a short credit history or a long one, this is a must to improve your credit score.
- Pay off your balances as soon as possible to avoid interest fees.
- Avoid applying for credit cards too frequently. Your application for a new credit card should not exceed more than six times a year.
- Keep your credit card balances low but active. Your balance should be below 60 percent of your card’s credit limit. An easy way to keep your card active is to use it for a necessity, such as gas or groceries.
- Resist the urge to close old accounts. While it may seem like a good idea to close credit cards you haven’t used in a while, it actually brings your credit score down. Keeping old credit cards open gives you a longer credit history, which makes you more attractive to creditors.
Kevin Craig is a financial writer who specializes in bankruptcy, debt, and personal finance management. He is also the manager of the personal finance search engine Monsterhols.