Is improving your Credit Score on your list of New Year’s resolutions? Try to keep these tips in mind!
Factors that Affect Your Score
Understanding the components that make up your credit score can help give you a better idea of how your financial habits could be affecting your score. Notice that, some components make up a larger percentage of your overall score and have a larger effect.
- 35% Payment History
- 30% Amount of Debt
- 15% Length of Credit History
- 10% New Credit/Accounts
- 10% Credit Mix
Check Your Credit Report
Don’t forget! Each year you are entitled to receive a FREE copy of your credit reports from the three reporting companies (Experian, TransUnion, and Equifax). For more information on how you can get a copy, click here!
Once you receive a copy of your credit reports it is important to fully review as it contains information from the past seven years. If you notice any mistakes or inaccuracies it is important to report them right away as they could be affecting your credit score! Also make note of anything negatively impacting your score, try to work on improving these items within the next year.
Avoid "Red Flags"
Make your payments on time! If possible, try to avoid negative information from being reported on your credit report. This includes delinquent or missed payments, overdue debts from collection agencies, bankruptcies, foreclosures, and tax liens. Negative information can remain on your credit report for many years, so try to avoid them if possible.
SmartTip: To avoid accidental late payments, set up monthly payment reminders or automatic payments! This will help keep you on track from month to month and hopefully prevent negative marks from being reported on your credit report.
Develop Habits That Work for You
While it takes some time, good credit scores result from good habits! In the new year, try to focus on developing Smarter Habits to help improve your credit score. Below are a few examples to help improve credit scores:
- Avoid applying for too much credit as too many inquiries can have a negative impact
- Pay all your bills on time
- Monitor your credit card balance – try to maintain a low credit card balance and use credit responsibly
- Pay off your debt instead of transferring it – do not borrow more than you can afford to pay
For more information on understanding your credit and credit report, you can read our SmarterLife Understanding Credit article by clicking here!