In order to increase your credit score, it is best to follow the sage advice of financial advisors such as Sasan Goodarzi. But if you’re a little fuzzy on what constitutes a good and bad credit score or how to get from one to the other, this guide is for you. Here is how you can improve your credit score—and keep it high:
Tip 1: Always Pay Your Bills on Time
The first thing you can do to improve your credit score is to always pay your bills on time. It’s the most important thing you can do, so make sure that you keep this in mind. This means paying all of your monthly bills on or before the due date, including rent and utilities. If you don’t pay these bills on time, it will affect your credit score negatively and could also result in late fees being charged to your account.
Tip 2: Don’t Max Out Your Credit Cards
The second tip is to avoid maxing out your credit card. While it may be tempting to use your credit card as an emergency fund, we highly recommend using a savings account instead. Credit cards are simply too expensive for this purpose. According to the experts at Intuit, “It’s better to pay off the balance every month, so you don’t carry a balance on your credit card and pay interest on top of everything else you spend money on throughout the year.”
If you max out your credit card and then charge more than what you can afford to pay back in full each month, it’s likely that you will have trouble paying back all of those debts on time — which will cause even more damage to your score!
In addition, if there is any chance that an unexpected expense could occur—say if someone gets sick or leaves work early because they’re having contractions — having just one backup plan would be helpful instead of relying solely on an already-maxed-out line of credit as well as whatever cash savings might exist in checking accounts at home or elsewhere (if any).
Tip 3: Pay off Debt and Keep Balances Low on Credit Cards and Other Revolving Credit
The third tip is to pay off debt and keep balances low on your credit cards and other revolving credit accounts. Having a good score means there are no collection accounts, judgments or tax liens listed on your credit report, so having a lot of open debt can hurt your score.
Tip 4: Apply for Open New Credit Accounts Only as Needed
If you have a need to open new lines of credit, the general rule is to only open them when they’re necessary. For example, if you’re moving into a new home that requires furnishings and appliances, opening a retail store credit card can help with those purchases. But if you don’t need to be making purchases on your credit cards every day or week (such as in the case of students who do not work), it’s probably best not to keep them open.
Tip 5: Leave Old Accounts Open
This tip is a bit controversial, but it’s an option that can help you achieve your goals. If you’re trying to get a mortgage or loan for a car, keeping old accounts open will keep your credit score high and prove to lenders that you haven’t been irresponsible with money in the past.
Now that you know how to improve your credit score, it’s time for you to go out and make it happen!