A credit score of 670 or higher, can mean having access to financing with the best rates and terms, a low credit score can mean paying higher interest rates and more loan fees — or even being denied financing altogether. Bad credit can also mean having trouble getting an apartment or a job if your employer asks to see your credit report for hiring purposes.
The following steps can help you improve your credit this year and beyond:
1. Set up bills for automatic payments. Because your payment history is the most important factor used to determine credit scores, make every effort to pay bills on time. Set up your bills for automatic payments so they're paid no matter what, and you can avoid unnecessary credit score damage.
2. Pay down existing debt. How much you owe concerning your credit limits is the second most important factor used for credit scores. This means avoiding carrying a balance on your credit cards and never using more than 25% of your credit line or your credit score could be impacted.
3. Look over your credit reports for errors. Check your credit reports from all three credit bureaus — Experian, Equifax, and TransUnion. You can do this once a year for free at AnnualCreditReport.com. If you find any errors or information you don't recognize, take steps to dispute this information with the credit bureaus.
4. Build credit with new financial products. If you need to build credit from scratch or repair credit after mistakes made in the past, look for new credit products that are easy to obtain. Your best options are secured credit cards that require a cash deposit as collateral and credit-builder loans.
5. Use a free app to build credit. You can use a free app like Experian Boost to get credit for payments you're already making like utility bills, subscription services, and even your rent. All you have to do is connect your accounts to this app to have your payments reported to the credit bureaus.
By Nancy J. Ekrem, National Association of Realtors