Credit scores are a numerical representation based on the analysis of our credit report. Credit scores range from 300-850, and there are slight variations dependent upon which one of the three major credit reporting bureaus you look at.
The lower our score, the higher an interest rate may be assigned to a loan we take out. On the opposite side, the higher our score is, the lower an interest rate may be assigned to a loan we take out. So what we want is a higher score so we can borrow at a lower rate.
We can find our credit score a few different ways. My banking institution provides it to me and this is becoming more popular among the banking industry. We can also find it on Credit Karma or purchasing it from one of the three major credit reporting bureaus. I haven’t used Credit Karma but have heard good things.
After locating our credit score, we may find that it is lower than we would want it to be. Here are a few ways to help improve our credit score.
1. Reduce and watch our credit card balance – The credit utilization ratio is an important aspect to credit scores. It is recommended to use 30% or less of our credit limit. So if our credit card limit is $1,000, we should only have about $300 or less on it.
2. Pay our bills on time – One of the best ways to improve or create a good credit score is by simply paying our bills on time, month after month. Yes, that’s right, just pay our bills on time, every time. Bill payment history represents 35% of our credit score.
3. Review and dispute errors on our credit report. We can access our credit report anytime for free through freecreditreport.com or by purchasing it from one of the three major credit reporting bureaus. The freecreditreport.com website is a government provided access point that we can utilize. If you find any errors, contact the credit reporting agency and they will provide instruction on how to dispute it.
If you want more detailed information about what a credit score is, check out “Do You Know What a Credit Score Means?” article.
Here is another article about how credit reports impact our lives. “How Does a Credit Report Impact Us?” article.
Being aware of our financial situation is the first step to success, so get on it!
Disclosure – Information contained herein does not involve the rendering of personalized investment or financial advice, but is limited to the dissemination of general information.