You may not realize it, but your credit score is a vitally important record of your financial history that banks, credit card companies, mortgage providers, and all manner of other organizations make use of to determine whether you are a good credit risk. Your record will reflect how good you are at paying off borrowings, and the more positive information there is available, the higher your score will be. This gives you a far better choice when it comes to new forms of borrowing or taking on a rental agreement, and you may well be offered better terms and lower interest rates if you have a good credit score.
Checking your score
In the United States, there are three main credit bureaux who keep track of your credit score – Equifax, Experian, and TransUnion. If you haven’t already done so, you should register with one of these services and take a look at what is held on file in your name. Make sure all the facts are correct, too; it’s not uncommon for there to be an error in your history that could be affecting your rating – for example, a mark against your address because of the previous occupier’s missed repayments, which have nothing to do with you. In addition to having poor marks for missed repayments, excessive debts and so on, you may have a low score simply because you haven’t had credit before, meaning there’s no indication to providers of how likely you are to make regular repayments.
Building your score
Once you’ve checked your current score and made sure the information held on you is accurate, there are several ways to improve your rating:
- Make sure you spend within your means and keep up repayments on any debts. Try to pay off more than the minimum on credit card borrowing each month if you can.
- If you’re paying a mortgage, this will automatically be recorded in your account, but that’s not the case for renters. If you are paying rent, sign up for a service such as RentTrack that makes your payments for you and reports this to the credit bureaux. That way you will gain the benefit of demonstrating you can make monthly payments on time, and the RentTrack cost for this service is very reasonable.
- Use a credit card to build up some history. This is a good idea if you have had debt problems in the past, or you have little or no history. Take out a credit card – there are specific cards available for people with low credit scores – and use it to pay for some of your regular purchases each month. As long as you are paying the card off on time, you will be adding positive history to your account.
- Don’t apply for loans and credit cards before using a calculator that assesses the likelihood that you will be accepted. Making applications leaves a mark on your file, whether you go through with the offer or not.
Credit bureau services usually offer advice on how to improve your score, so it’s worth checking out what they recommend. Taking steps to improve your score will save you money and give you a far greater choice when it comes to financial decision-making, so it’s well worth making the effort.