Your credit score is crucial to all major financial transactions, including getting a mortgage. FICO credit scores range from 300 to 850. The higher your credit score, the better; however, achieving and maintaining a stellar credit score isn’t always possible—life happens!
Unfortunately, there’s no quick-and-easy way to improve your credit score overnight, but you can start today making small tweaks that will boost it over the long run.
1. Get a credit report.
First, you want to get a copy of your credit report. The Federal Trade Commission allows you to request a free copy every 12 months. You can do so online at annualcreditreport.com or by calling 1-877-322-8228. Once you have a copy, take a good hard look at it. You’ll want to make sure all information is correct and dispute any inaccuracies.
Additionally, you’ll want to look closely at the Credit Accounts Section because this is where you’ll get an idea of how you can improve your credit score. For instance, are you seeing a history of making payments late or opening a lot of credit cards in a short time? Look through everything to get an idea of how you’ve handled credit.
2. Take stock of how much you owe.
Make a list of everything you owe—credit cards, car payments, student loans, etc. Start to sort and organize your debt from smallest to largest. Make a budget that ensures you’re paying the minimum amount each month and, hopefully, includes a little extra to start paying down. Not paying the minimum amount can dock your credit score so make sure you’re able to cover it.
3. Set up payment reminders.
In addition to not making the minimum payment, one of the other biggest things to dock your credit score is making a payment late or missing a payment altogether. If you pay your bills through the mail, set up a system so that as soon as a bill comes in you send the check the next day. If you pay online, sign up for email alerts to notify you in advance.
Additionally, it doesn’t hurt to have another layer of reminders. Set up recurring notes on your phone’s calendar or sign up for a service like Mint that will keep an eye on your due dates and send you alerts.
4. Start paying down debt.
One of the most efficient ways to pay off debt is through the Snowball Method where you tackle your debts from smallest to largest. Start by sorting debts from small to large and make the minimum payment on each one. With any extra money you have budgeted, put that toward your smallest debt until it’s paid off. Now take that full amount you were spending on the lowest debt and put that toward the next smallest debt. Repeat until every debt is paid off.
Here’s how it works:
- ● You owe $500 on one credit card, $2,000 on another, and then $10,000 on your car. You’re already paying $25 + $100 + $300 a month in minimum payments.
- ● You add an extra $100 a month to your smallest debt so now your minimum payments look like $125 + $100 + $300 each month.
- ● You pay off the $500 credit card, take that $125 (because you already have it budgeted) and apply it to the $2,000 credit card. So now your minimum payments look like $225 + $300 a month until the $2,000 is paid off.
- ● Rinse and repeat.
Improving your credit score is a marathon, not a sprint, but you can start making changes to boost it over time. If you keep an eye on your debt, make the minimum payment each month on time, and start paying off your debt, you’ll see an increase in your credit score within a year!