Your history of how you have paid your bills is what creates your credit score, which is reported in your credit report, explains Consumer.gov, a consumer website by the Federal Trade Commission.
Why do you have a credit report? Businesses want to know about your money habits. Would you want to lend money to someone who pays bills on time? Or to someone who always pays late? That’s how businesses decide if they will give you a credit card or lend you money to buy a car, get a cell phone, or other purchases. Sometimes employers considering hiring you for a job and insurance companies considering whether to insure you will look at your credit report. Visit Annual Credit Report to get a free copy of your credit report from all three credit reporting agencies
Here are steps to boost your credit score:
- Pay your bills on time: Set up automatic payments or reminders to ensure you never miss a due date. When you miss a bill payment, that late bill could lower your credit score.
- Reduce your debt: Aim to keep your credit card balances low relative to your credit limits. Paying down existing debt demonstrates responsible financial management.
- Monitor your credit report: Regularly review your credit report for errors or fraudulent activity. Disputing inaccuracies can prevent negative impacts on your score.
- Diversify your credit mix: Having a mix of credit types, such as credit cards, loans, and mortgages, can positively impact your score. However, only take on new credit when necessary.
- Keep old accounts open: The length of your credit history matters. Even if you no longer use a credit card, keeping the account open can lengthen your credit history and improve your score.
- Limit credit applications: Each application for new credit generates a hard inquiry on your credit report, which can temporarily lower your score. Apply for credit strategically and sparingly.