Boost your credit and pay less interest on loans and credit cards.
Tip #4: Don’t close unused credit cards accounts. Canceling a card can actually lower your score. For more info about how that happens, read one of my previous posts. A better strategy is to occasionally use your older credit cards so the issuer doesn’t stop reporting your information to the credit bureaus. Having a long credit history helps increase your score—so remember that hanging on to older cards is a good idea.
Tip #5: Never max out your credit cards. A good rule of thumb is to keep your balances below 30% of your credit limit—even if you pay them off in full each month. For example if you have a card with a $3,000 credit limit, don’t rack up a balance that exceeds $900. It’s better to have two cards with balances that are each below 30% of your limit, than to have one card that you consistently max out.
Tip #6: Do your loan shopping quickly. Since your credit score gets pulled when you shop for a loan, submit applications to potential lenders within a two-week period. Having lots of credit inquiries can decrease your score. But the system won’t treat a cluster of credit inquires (for a car or home loan, for example) within a short time period unfavorably.
Tip #7: Get a secured credit card. If you have no credit history or a low credit score, a secured card can help you build credit if it reports information to the credit bureaus. You have to dish out an upfront security deposit of at least a couple hundred dollars, which the card issuer holds as collateral. Some secured cards will extend you credit after you show responsible use for a minimum of six months. Check out the Public Savings Bank Visa, which is a secured credit card that offers 0% interest on purchases for 6 months with no annual fees. It reports payment history to each of the three credit agencies.
Tip #8: Get a gas store card. Even though you may want to buy more than gas, beer, and snacks on credit, those types of cards can be easier to get than regular credit cards. And if you’re trying to establish a credit history, making small monthly charges that you pay off in full and on time each month will work wonders for boosting your credit score quickly.
For more Money Girl advice regarding credit scores, check out these episodes and tips:
- Does Canceling a Credit card Hurt Your Credit?
- An Easy Way to Build Your Credit Score
- Where to Get Your Credit Score
- What Affects Your Credit Score the Most?
- Don't Let Inquiries Lower Your Credit Score
Money Girl’s Smart Moves to Grow Rich
How to improve your credit score is just one of the essential everyday money topics I tackle in my upcoming book, Money Girl’s Smart Moves to Grow Rich, that’s coming out in December. The book is a modern, yet common-sense approach to take charge of your finances and whip them into shape so you can build wealth. It’s loaded with advice and tips about choosing the right bank accounts, setting your financial goals, planning for retirement, buying real estate, paying for education, lowering your taxes, and so much more!
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