If you’ve ever applied for a loan, signed a lease, or received a credit card, you’ve probably had financial organizations look at your credit score. Before you’ve had a chance to prove that you’re reliable, your credit score is usually so low that banks require cosigners on all your loans. If you want financial independence and want to know the credit score average, here are six ways to make your credit score more useful.
1. Understand What Your Credit Score Is Now
Before you can improve your credit score, you need to understand exactly where your score falls. First, contact a financial organization to receive a free credit score. These numbers range from 300 to 850, with 300 reflecting a bad credit history and 850 reflecting an amazing one. If your score is 740 or higher, you shouldn’t have much trouble receiving a loan. If it’s lower, you need to do some work. The credit score average is around 710.
2. Identify Your Outstanding Payments
If you opened your credit score report and were shocked by how low it is, spend some time tracking down all the debts that are lowering your score. Look for student debt with outstanding payments, payday loans you forgot to pay off, overdue rent, and late credit card bills. Pay off as many of these debts as possible with your savings account, and then work with an accountant to make a schedule and reminders for keeping up with the other payments.
3. Cut Down on Credit Applications
If you apply for credit cards regularly, your bank conducts a hard inquiry into your credit history. While one hard inquiry does not hurt your credit score, your rank usually falls if you continually request credit. As you keep submitting applications, financial organizations think that you can’t handle your finances and need help paying your bills. This method of keeping up with your debt makes you a higher risk for banks to take on, and so they’re more likely to deny your application. Unless your employer or landlord insists, stop applying for credit allowances that involve hard inquiries.
4. Use the Same Credit Accounts
When possible, instead of getting rid of your old credit card accounts or lines of credit, leave them open. You receive extra points for maintaining the same credit accounts over a long period of time, which shows that you’re a reliable credit partner. Keeping these accounts open also gives you time to pay off your outstanding debt, which is another way to improve your credit score.
5. Stay Secure
If you’re not careful about banking security, it’s easy for online criminals to steal your financial information and ruin your credit score. While some banks can help you fight fraudulent credit card charges or shut down unauthorized accounts, these crimes are sometimes hard to spot until it’s too late. Monitor your bank accounts to see if any money is leaving them without your permission. Change your passwords regularly, and always create secure ones that use a mixture of numbers, letters, and special characters.
6. Keep Track of Your Credit Progress
Sign up for credit monitoring services to see how your credit score changes as you take these steps. Most major organizations refresh your credit score every month, and credit monitors allow you to see this number without conducting a hard inquiry. They also give you access to your credit report, so you can see how each payment or charge affects your overall credit.
By following these six steps, you can cultivate your credit score and credit score average into one that lets you buy a house or go to college. These actions also help you make savvier monetary decisions, setting you up for long-term financial success.