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Your credit score can be the deciding factor for many big moments in your life: when you want to buy your first home, refinance your car or send little Timmy off to college. Whenever you need to borrow money, your credit score will likely come into play.
If you are anticipating any of those events in the next few years , now would be a good time to start working on increasing your score.
10 Ways to Improve Your Credit Score in 2022
We touched on this a bit in our previous blog about what affects your credit score, but there’s so much to say about credit, we just had to expand the list. Here are the top ten ways you can boost your credit score in 2022 and beyond.
1. Pay Your Bills On Time, Every Single Time
This one has a huge impact on your credit score – one or two missed payments can turn a great score on its head.
Credit bureaus calculate your score by taking the number of on-time payments as a percentage of your overall payments – and they want to see that number as close to 100% as possible.
If you’ve made 100 payments on your Target RedCard, and five of those payments were late or missed, you’re already down to a 95%. While that score might’ve been an A in high school, it’s considered pretty bad on a credit report. In general, an on-time payment rate below 98% can start dinging your overall score.
Payment history is a big deal to lenders, so make sure to pay off those bills each month! Or, better yet, set up autopay to automatically pay off those credit card bills each month, ensuring you never miss a payment.
2. Watch Your Credit Utilization
Credit utilization is the percentage of your overall available credit that you’ve borrowed. Just because you can borrow $10,000 with that fancy credit card doesn’t mean you should.
Your credit score takes into account how much of your total limit you’re spending. Best-case scenario? You’re keeping that utilization percentage under 30%. That means that if you’re approved to borrow $1,000, you should really aim to spend under $300 or so. Good credit utilization shows lenders that you can borrow responsibly.
3. Keep Those Old Accounts Open
The more history you have, the better. This has an even bigger impact than your number of accounts or your amount of hard inquiries (more on that later).
Your credit age is the average length of all your lines of credit together. If you have an account that’s 10 years old and an account that’s 5 years old, your total credit age will likely land somewhere around 7.5 years. If you were to close down that 10 year old account, your credit age would drop to 5 years.
So, if you’re looking to close down any of your accounts, it’s best to start with the newer ones first to keep your overall age higher.
4. Or Open New Accounts
New accounts can drag down your credit age, but that doesn’t mean you should avoid them like the plague. New accounts add to your total number of accounts and can diversify your types of credit.
Lenders want to see you borrowing responsibly, so while a new account might lower your score initially, it can definitely boost your points in the long run. Just be sure to choose accounts that make sense for your financial situation, and to never borrow more than you can afford.
5. But Avoid Too Many Hard Inquiries
Any time a lender asks to view your credit report, it’s known as a “hard inquiry.” Too many hard inquiries in a short period of time can hurt your score and seem fishy to lenders.
Instead of applying for every credit card in sight and hoping for the best, do your research and choose one or two that really make sense for your situation.
6. Check for Inaccuracies
Credit scores aren’t infallible. In fact, 34% of Americans have reported at least one error on their credit report.
In spring of 2022, Equifax reported millions of scores incorrectly, leading to many scratching heads as to why they were denied credit.
It’s a good idea to check in on your report a few times a year to ensure everything is up to date and listed correctly. Is that account you closed still showing up? Is there a new hard inquiry you have no knowledge of? If you see an error on your credit, don’t hesitate to report the inaccuracy and set the record straight.
7. Request Higher Credit Limits
If you want to keep your credit utilization low, consider requesting a higher credit limit.
You can reach out directly to your credit card issuer and ask for an increase. For example, if you were initially approved for a $1,000 credit limit but your income has significantly increased since then, you could request an increased limit of $1,500.
If you spend the same amount on your credit card after the increase as you did before, your overall credit utilization will decrease. In turn, this could add a few points to your credit score.
8. Diversify Your Credit
Credit bureaus like to see that you’re using a variety of account types: credit cards, student loans, mortgages, etc. This is known as credit diversity.
Credit diversity counts for about 10 percent of your overall credit score. While that may seem small, those points could make the difference between good credit and great credit.
9. Monitor Your Score Regularly
You won’t know where your score needs improvement if you’re not checking on it regularly. There are plenty of sites out there that allow you to check your credit at low or no cost, such as Credit Karma.
U.S. citizens are also entitled to one free credit score each year per bureau. You can choose to request these scores one at a time or all together.
10. Work with a Financial Advisor
When it comes to your finances, knowledge is power. A financial advisor can give you curated and specific advice on how to raise your credit score and manage your money in line with your goals.
Credit plays a big part in making your life’s big moments a reality – so don’t wait. Take these ten steps to start boosting your score today.