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Credit score is an important part of our financial life. This three-digit number can influence our ability to get approved for a credit card, interest rate on a mortgage, ability to obtain an auto loan, and a bunch of other aspects of our life. If you want to start the new year by committing yourself to improving your credit score, here are some strategies to successfully do that.
No matter whether that is VantageScore or FICO Score, we all know what our score is based on. Those basic criteria are payment history, amounts owed, length of credit history, new credit, and credit mix. The first two always require our closest attention as together they make up the biggest percentage of the credit score.
The first thing you should do to start your journey to better credit score is to review your credit reports from all three major credit bureaus - TransUnion, Experian, and Equifax. Look for inaccurate information, accounts you do not recognize, as well as for things you can improve. Thus, if you find errors, try to dispute them with the credit reporting company. Accounts you do not recognize may be fraudulent accounts and you may want to use identitytheft.gov to report them.
If you have accounts with late payments, try to pay off all past due payments and continue being on time with all at least minimum payments going forward. You can enable automatic payments to make sure you never miss a monthly payment again. Automatic payments are convenient, but you should always make sure you have a positive balance in your bank account. You can also set up reminders to ensure you won't be late with any payment.
For accounts with outstanding balances, try to lower your debt or pay it off in full. By carrying a credit card balance from month to month, you cancel all rewards you earn on the card because an interest rate is always higher than a rewards rate. You can start with paying off the account with your biggest debt or pay off accounts with small balances first - the strategy is yours to choose.
While you are paying off your debts and straighten out monthly payments, refrain from applying for too much credit. It may put unnecessary strain on your budget and more risk. Sign up for a credit monitoring service instead. Credit monitoring services help you monitor your credit profiles and notify you of any changes. That means you can act more quickly when your credit score drops or a late payment is reported.
If you want to boost your credit scores in 2023 make sure you have a plan. We hope this short guide will help you to compile one.