The average millennial's credit score is 668. This means a lot of late 1980s and early 1990s babies have great credit at this point in life. But it also means a solid half fall below the "good" threshold of 670.
Having good credit is essential for getting credit cards, personal loans, vehicle loans, and home ownership loans. Even if you can get approved for a loan, if you have lousy credit, your rates could be through the roof, increasing your cost by unreasonable amounts.
If you have bad credit, read on to learn how to increase your credit score. A better credit score will vastly improve your ability to do things in life like getting a new cell phone or buying a house.
Check Your Score
You learn how to build your credit by checking it. When you measure something, you can improve it. This is why you should track down your Experian, Equifax, and TransUnion credit reports.
Free websites like Credit Karma can give you an overview of a couple of your scores, but they may not be perfectly accurate. Check with your bank or existing credit card company to see if they can provide you a copy.
If not, go directly to the report providers Experian, Equifax, and TransUnion to get information.
You can go to myfico.com to get your Fair Isaac Corporation (FICO) score. This number is used to help decide whether or not you can get loans. It is helpful to track this along with your credit report scores as an overall view of your creditworthiness.
Don't Spend Money You Don't Have
The essential rule for using the credit you have wisely — and therefore increasing your creditworthiness — is to only use credit cards for money that you already have.
Credit cards are not free money. You must have money in your bank account or coming next week in your paycheck that is equal to or more than the amount you are about to put on your credit card.
If you pay your card statement completely off every month, you will not only save money on interest, but you will also improve your credit score.
Paying off money you owe is the very essence of good credit. Build your credit and increase your scores by responsibly using your cards. This is one way how to increase your credit score quickly.
Pay small parts of your balance more frequently. If you get paid twice a month, use some of each paycheck to lower your balance rather than waiting until the end of the month to pay the whole thing. This helps if you are trying to get approved for a loan or card mid-month, as it lowers what you owe.
Paying Other Statements
This goes for student loans and vehicle loans as well. Each missed payment is reported to your credit, dropping your score. If you don't think you'll make a payment this month, call the company as early as possible to work out a deal.
Fewer Accounts, Longer History
Don't open too many credit card accounts. Leave time between opening accounts. Each time you open an account, an inquiry is made against your credit reports. Too many of these lower your scores.
In reality, you probably only need one or two credit cards. Get the best one you can while starting out. After building your credit with that over a few years, get a better one with rewards like cashback.
Do not close the earlier account. Just leave it be if you don't plan to use it anymore. Closing an account shortens your credit history.
The longer your credit history, the better your score. Companies like to see that you have been responsibly using your credit for a long time. When you close an account, it takes away part of your history.
If you must close accounts, do not do it all at once. Your credit history will virtually disappear, tanking your score. Instead, pay off your cards and then simply stop using all but what you need.
Use a Small Percentage of Your Credit
Every time you are eligible for a limit increase, take it. Even if you don't need $15,000 on your credit card.
This is beneficial because if you increase your limit but not your spending, your credit-to-usage ratio increases. The bigger the gap between how much you spend and how much you could spend, the higher your credit score will be.
If you need to figure out how to build credit fast, this is one of the few times where it might be helpful to apply for a new card while trying to improve your score. A new card will increase your credit to spending ratio, and improve your score.
The caveat is to not increase your spending. Also, do not open more than one new account at a time. Having too many new accounts also affects your score.
Benefits of Improving Your Credit Score
If you build up your credit, you will notice dramatic changes in what you can do in your life. You will find it easier to get a cell phone and plan. You will be offered better terms on vehicle loans.
You might even be able to lower your insurance rates with a re-score. Learn more from this article.
One of the best things a higher credit score can do for you is to change your housing options. A lower score may keep you in an expensive apartment in an undesirable location. A better score may help you find a higher quality apartment or even get approved for a home loan.
Now You Know How to Increase Your Credit Score
Now that you know how to increase your credit score, get started as soon as possible. One of the best ways how to build credit today is to stop anything that might harm your credit score further, like leaving bills unpaid or collecting interest.
Pay off as many bills as quickly as you can. Develop a budget that keeps you from overspending on credit cards, but don't close your credit card account. These financial tactics will help to boost your credit score quick.
A better credit score is possible. Learn more about healthy finances from My Frugal Fitness's articles to better boost your credit score and demolish debt.
