By Tyler Wirth, AVP, Retail Manager
Your credit score has a big impact, especially when it comes to making a big purchase.
Whether you’re shopping for a car, buying a home or opening a new line of credit, financial institutions and other companies use your credit rating as a snapshot of your dependability. In other words: your score determines whether you qualify for a loan, what interest rate you’ll be charged and the maximum amount you can borrow.
Of course, the better your score, the better your rates! Even small differences can save you thousands in interest over the life of a loan.
So how is your score calculated in the first place? It’s based on:
From setting up automatic payments to monitoring your credit reports, here are seven simple ways to start building or improving your score:
Always pay your bills on time.
Make it a habit. Honestly, it’s the single biggest way to increase your credit rating.
Even one payment that’s 30 days late can bring down your score, and it stays on your credit report for up to seven and a half years. Late payments can result in additional late fees or penalty APRs, too.
Build your credit history.
Credit cards can be a valuable way to build your credit history, if you use them carefully. Research and compare your options, since different cards come with different rates, features, fees and reward programs like travel discounts and cash back. It depends what is best for your lifestyle!
|Tip: Thinking about opening a new credit card but still have an old one or two? Closing your oldest card with a high interest rate or an annual fee might be the best choice for the long haul, but it will also decrease the average age of your accounts – which can negatively impact your credit score, at least for a short time. In other words, consider the pros and cons first. It may be worth still using your oldest credit card a couple times a year, just to keep it active.|
Pay off your credit cards every month – or at least the minimum due.
Credit cards are convenient, but they also make it easy to overspend. Try to pay your cards off every month, or maintain a low balance to avoid hefty interest fees.
Pay down debts using the “avalanche” or “snowball” method.
There are two common approaches to consider, depending on your situation:
Set up auto-pay.
Setting up automatic payments can be a lifesaver, and it’s never been easier. Online bill pay is a great way to stay organized, pay your bills on time and take more control over your finances.
You may be able to request a different monthly due date for your home, auto or student loan to ensure automatic payments are in sync with your paycheck schedule, too.
Put due dates on your calendar.
Don’t have the option to make automatic payments with some bills? Try setting calendar reminders on your phone instead. Start by making a list: cell phone, streaming services, utilities, gym memberships, you name it. Then add the payments to your calendar as recurring events.
Review your credit report.
Last but not least, review your credit history to fix any mistakes and make sure there’s no suspicious or unexpected activity. You can request a free credit report once every 12 months from all three major credit bureaus (Experian, Equifax and TransUnion) at annualcreditreport.com. It really is free, so take advantage of it – especially if you’re planning to make a big purchase in the next six months.
Remember, some small changes will pay off quickly. Other good habits will make a bigger impact over time. Whatever’s next on your list of financial goals, stop by one of our convenient locations and talk with a personal banker. We will be happy to help!