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By making small changes to how you manage your finances, you may be able to boost your credit score.
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Maintaining a good credit score is ideal, but building credit takes time and effort. A good credit score can unlock better financial opportunities and make life less stressful. Developing certain habits can help you get there sooner. These practices could help boost your credit score as you work to set yourself up for financial success.
1. Pay more than the minimum amount due
When it comes time to pay your credit card bill, make sure you pay more than the minimum amount due. The smaller, minimum payment amount may look tempting — but it’s a trap. You’ll be charged interest on the unpaid debt if you don’t pay your entire credit card balance.
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This extra cost can be expensive and adds up the longer you ignore it. Credit card debt is one of the most common forms of consumer debt and can cause financial stress and lead to further financial troubles. By paying your entire card balance, you can avoid expensive interest charges.
Doing this can help you stay on track with your financial obligations, so you don’t fall behind on important bills because of a lack of funds due to having to put more money toward interest. If you struggle to pay the entire card balance, consider reducing your credit card usage. That way, your total balance is manageable and fits your budget.
2. Keep your credit utilization low
If you use credit cards, you should pay attention to how much available credit you use each month. While you may have a high credit limit on your cards, spending anywhere near your maximum limit is not good practice. Why? Your credit utilization ratio, or how much of your available credit you use, makes up 30% of your credit score.
Maintaining a lower credit utilization ratio is advised. You can keep your credit utilization low by not using all available credit. Experts recommend keeping your credit utilization ratio below 30%. For example, if you have a $15,000 total credit limit between all of your credit cards, it’s in your best interest to keep your total charges below $4,500 each month.
3. Prioritize debt payoff before taking on new debt
Credit cards and loans are financial tools that can help you afford a new expense. But by taking on new debt, you could be putting yourself in a difficult financial situation. If you’re not cautious, the debt can add up quickly and get out of control.
Before taking on new debt, consider whether you can afford to do so. Of course, emergencies do happen, and unless you have a solid emergency fund set aside, you may have to explore financing options to cover important, unexpected costs.
But if you have existing debt and no emergency expenses have come your way, prioritizing debt payoff is the best move for your wallet. The sooner you tackle your existing debt, the quicker you can begin working to meet other important personal finance goals.
4. Set up payment reminder notifications (or enable autopay)
Forgetting to pay your bills can not only cause you added frustration but can negatively impact your credit. When you fail to pay your bills, or pay them late, you can expect to see negative marks on your credit report — which can harm your score.
One way to avoid missing payments is by setting up payment reminder notifications for all your bills. Another option is to enable autopay. By automating the payment process, you no longer need to worry about being forgetful. Keep in mind this option may not be a great fit for you if you tend to have minimal cash left in your checking account after all your bills are paid.
5. Don’t part ways with older credit accounts
A lengthy credit history is ideal because it shows creditors you have been managing your finances well for a significant amount of time. The age of your credit history makes up 15% of your FICO® Score. For this reason, keeping older credit accounts open is beneficial.
If you have older credit cards with no annual fees, don’t be in a rush to close the accounts. Instead, get into the habit of using your older cards occasionally, so the accounts remain active and can help you boost your credit score. If you have an older credit card with an annual fee, check with your card issuer to see if you can downgrade the account to a no annual fee credit card.
You can increase your credit score by changing your current behaviors and developing new habits. Small changes can add up over time to make a big difference. If you’re in the market for a new credit card, take a look at our list of the best credit cards to learn more.
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