It used to be a real chore to find out your credit score, but now you can track it in a whole bunch of different ways. For example, there are several websites that'll show you your numbers for free (or a small monthly payment). If you are banking online, you may have seen the offers for a weekly peek at your number. But for some of us, that's the easy part - so if you find yourself dreading the news, we have a few ideas for boosting that number.
First, understand that your credit score is like a magic 8 ball for creditors who're trying to predict the likelihood that you'll pay your debts. It's most important when you go to get a mortgage, auto loan or credit card, but other companies use it too; for instance prospective landlords look at it when they are deciding whether to rent you an apartment.
Calculating The Magic Number
There are several factors that go into how credit agencies determine your credit score. Your payment history is the largest factor, making up 35 percent of your number. Next, at 30 percent, is the amount you owe to creditors, followed by how long you've had a history of using credit at 15 percent. After that, it's new credit and the different types of credit you have (auto loans, credit cards, mortgage, student loans, etc.).
Building up a good credit score will take time, but what you have to do to get there doesn't have to. A few simple smart choices on your part can add up over time to give you the number you're working toward.
Increase Limits, Not Number Of Cards
You may think that taking out more credit will increase your number because that lowers the percentage of credit owed. That's half true; having more credit available than what's being used is helpful, but that doesn't mean you should open more cards. Opening several new lines of credit at the same time can look bad, as it's considered new credit, and therefore negatively impacts your score. Instead, periodically ask your current card issuers to raise your credit limit by $500 or even $1,000. Paying off balances is also important in giving you more "unused" credit wiggle room.
Maintain Old Accounts
Even if you're no longer using that Old Navy credit card you opened as your first card back in college, don't close it! Canceling a card reduces the amount of credit available, and can hurt your score. It also contributes to the length of credit history you've had.
Even if you don't like the number, you need to check your credit report once in a while to make sure everything is correct. Any mistakes or illegal access to your credit will damage your score. By law, you're able to get a free copy of your credit report yearly from each of the three major credit-reporting companies, so take advantage of that and be diligent with checking your credit history.
Another thing you should pay attention to is payment due dates. Missing payments is a huge negative on your credit score, so if you're not very good at remembering to pay your bills on time, set up reoccurring automatic payments. Schedule them a few days before the payment due date, so you can make sure you're covered.