These days, many young people lack the skills to effectively manage their finances, let alone their credit scores. Your credit score is a three-digit number used to determine your creditworthiness should you ever apply for a loan. This number affects your ability to buy a home, finance a car or get a credit card. If you’ve let your credit score tank, the good news is that it’s fixable. Here are six ways to take control of your credit score right now.
- Create a Payment Schedule
The first thing you should do to get your credit score moving in the right direction is to create a payment schedule for your bills. Nothing kills a credit score faster than paying accounts late or forgetting them altogether. Buy an inexpensive calendar you can write on and insert due dates for every bill you pay. Then, pencil in your paydays and check your schedule every day so you don’t miss a payment. If you set up automatic online payments, don’t forget to deduct them from your bank account.
- Make Your Credit Card Work for You
If you’re determined to build your credit, select cards that work hard for you, such as an American Express credit card with rewards. Cards that give you points help you save money on other purchases or may be applied as a credit to your balance. If you have poor credit, search for a card with no annual fee or one made for poor credit, such as a secured card. Also, check your free credit report each year to ensure that mistakes aren’t hindering your score.
- Maintain Low Credit Card Balances
If you can afford your monthly credit card payment, what’s wrong with using your entire limit? Many people who have maxed out their accounts see nothing wrong with this behavior if they’re making their payments on time. Unfortunately, creditors don’t see it the same way. When you keep large balances on your credit cards, lenders look unfavorably at your spending habits. Never spend more than 30% of your credit limit, and your credit score will rise.
- Don’t Apply for Store Credit
It happens to everyone: you go to the register to pay for a purchase and are immediately offered a 10-15% discount for opening a store credit card. Resist the temptation! Store credit cards are known for having high-interest rates, and you’ll be in trouble fast if you have poor spending habits. Plus, taking out too many credit cards is bad for your score. Stick with one or two major credit cards for emergencies, and use cash for the rest. If you don’t have the cash on hand to buy it, put it back.
- Keep Your Oldest Credit Card
Building a good credit score takes time, so if you have an older credit card, keep it open! Even if this card doesn’t offer the rewards you enjoy, it demonstrates the length of your credit history. Your best bet is to pay off the balance, then use it for tiny purchases. Pay off the balance each month to give your credit score a healthy boost. If this is your only card, don’t be shy about calling customer service and asking for a lower interest rate.
- Refrain from Co-Signing a Loan
Once all your hard work has paid off and your credit score improves, the last thing you should ever do is co-sign for a loan. Co-signers are needed when someone’s credit isn’t good enough to secure a loan on their own. However, you’re putting yourself at risk by signing that dotted line. If the borrower forfeits the loan, you’ll be liable for the entire amount. That could wreck your budget, your credit score and probably your relationship with the borrower.
Your credit score is detrimental to your future so keep it in good standing. When you maintain low balances, keep your oldest card open and never miss a payment, your credit score will rise.
