Let’s face it – most of us do not think about our credit score on a daily basis. Generally this is fine, but on the day that you start shopping for a new home mortgage, business financing, or even an auto loan, your credit score can be the gateway, or barrier, to qualifying for the best interest rates. Here are some easy habits to help ensure your credit score is at its peak:
Make sure your bill due dates are after your payday. This will hopefully ensure you have enough cash-on-hand to make your payments and most credit providers do not have a problem changing your due date to accommodate your needs. Setting up automatic payments can also help avoid late payments, which can hurt your score by as much as 60 points each.
Decrease your credit utilization ratio. Your credit score fluctuates significantly based on this factor and the good news – you are able to control it! Many lenders look for a credit utilization ratio of less than 10%. For example, if you have a $5,000 credit limit, try not to charge more than $500 each month. If you utilize a greater portion of your credit, you can avoid having that show up on your credit report as long as you pay off the balance before the statement close date (note: this differs from your due date). From time to time, you may also request an increase in your credit limit, but keep your charging in-line with your income and savings plan – not your credit limits.
Build your credit history. A credit report tracks the life of your credit usage and your score benefits from “aged” accounts, so don’t close that old card or account just because you paid it off – not only will this lower your total credit limit (effectively increasing your credit utilization), it will also decrease the “age” of your accounts. If you have several cards, try using each card for a specific purpose (groceries, gas, travel, etc.) – this can help you monitor your spending in each area and keeps them all active.
Know your report. Credit bureaus are required to grant you access to your credit report each year. You can check your credit report annually at www.annualcreditreport.com. Protect your score by disputing any errors in writing as soon as you identify them with all three credit bureaus (TransUnion, Equifax and Experian).
Rebuild with help from others. Sometimes life events happen that negatively affect our credit scores. This is often the case when couples split and joint accounts are closed. If you are in this situation, you may be able to raise it by having a parent or close relative add you to one of their accounts that are in good standing. This account will appear on your credit report and bolster your credit score as a result.
If you have questions about how your credit score and report affects your borrowing potential or you have followed these steps and are interested in financing options, please contact Bank of Montana today; our loan specialists are happy to assist you.
For more information on what your credit score means, visit our Blog post: Know Your Credit Score and What it Means
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