5 Ways to Boost Your Credit Score in 2022
Improving your credit score can be a game-changer for your financial health and wellbeing. Having good credit can mean lower interest rates on your credit cards, better loan rates, preapproval for new credit and financing options, home and auto loans, and more. And while it might seem daunting to try and boost your credit score, with our credit tips and tricks, you can learn how to increase credit score ratings and reap all the benefits that come along with having great credit.
Read on to learn the top 5 best ways to improve credit, no matter what your score is today.
1. Pay Your Bills on Time
Consistently paying your credit card, utility, and other monthly bills on time can quickly help your score go up. Many credit unions and other financial institutions, as well as individual providers and credit card companies offer automatic monthly payments to help you stay on time with your payments. These programs often take just minutes to set up and can prevent you from missing payments.
Paying your bills on time is one of the best ways to boost credit, as it shows creditors that you’re financially responsible, make enough money to repay what you borrow, and ultimately are a “safer bet” if you’re applying for a loan or credit in the future.
2. Think Before Closing Out Old Accounts
Length of credit history is a large factor in determining your credit score. Yes, paying down debt can be smart. It reduces what’s known as your “debt-to-income-ratio” and should always be something you keep in mind, but actually canceling or closing accounts can end up hurting your credit score.
After you’ve paid off a card, think twice before closing it out, especially if it doesn’t have an annual fee. Low or no balances can show creditors that you don’t live beyond your means and that you know how to budget.
3. Credit Used vs Credit Available
Try to keep your total amount of used credit compared to available credit as low as possible. As a general rule, try to use no more than 30% of your available credit at any given time. That said, having some credit is important so that you can build up a history of using and paying down balances regularly, which shows that you can manage your debt in a healthy way.
Because keeping an appropriate balance is one of the easiest ways to improve credit scores, Island Federal offers free access to credit monitoring software that can help you see your used vs. available credit and other helpful credit boosting information.
4. Limit Hard Queries on Your Credit
There are two main ways to view your current credit score – hard inquiries and soft inquiries.
Hard inquiries can occur when you apply for a credit card, auto loan, mortgage, or other loan product. While sometimes inquiries are unavoidable, too many in a short period can bring your score down. Don’t apply for multiple loans or credit cards just to see which ones you get! You can shop loans or potential interest rates without actually applying for numerous different opportunities.
Soft checks must be authorized by you and allow a potential lender to check your credit before they offer you a loan or any type of financing. They’re available through various credit monitoring services. They do not affect your credit score, but can show potential lenders things like:
- Payment history
- Lines of credit
- Collection accounts
- Public records
5. Sign Up for Free Credit Monitoring
There are various credit monitoring services that allow you to regularly monitor your credit score. These paid services can do wonders if you want to keep a bird’s eye view on your total credit usage, payment history, and more. They’re also a good tool for monitoring credit fraud.
But beware – don’t go around blindly giving out your credit card and social security number to any credit monitoring company you find on the internet. Any reputable financial advisor or institution will strongly suggest that you consider using credit monitoring that’s associated with your credit union or financial partner. This way you know your information is safe and the data you receive is reliable.
Your credit score is one of the primary tools used to determine your rate on mortgages, auto loans, credit card interest rates, and other large-scale purchases. Knowing how to increase credit scores might mean you can save a bundle on financing interest fees. In fact, you might be able to save up to $100,000 on your mortgage!
Ready to get started? You can always contact a Member Services Representative at your local Island Federal Credit Union to learn other ways to improve credit scores so your borrowing power is in tip-top shape!