Knowing These Five Secrets Will Make Your Credit Look Amazing

What’s your credit score? This is a question you’ll often hear in adulthood. The answer will dictate what you can purchase, how much you can borrow, and how much you’ll pay for products and services you need and want. Your credit score is a numerical calculation of your financial history used by creditors, lenders, and service providers to determine your creditworthiness. The higher your score, the better your economic opportunities are.

Acquiring An Excellent Score

Credit scores range from 300 to 850. Most people start with a 300 because they don’t have a financial history. A score this low will also make it harder for lenders, creditors, and service providers to make decisions on products and services. 

If approved, you’ll often pay more due to your risk level. That’s why people try to maintain an excellent score by opening financial accounts, borrowing money, and making major life purchases (college education, car, home, etc.). 

The Fluctuating Score

Of course, there’s more to maintaining an excellent credit score than opening accounts and borrowing money. How you effectively manage these accounts directly impacts your credit score. Ultimately, every transaction and financial decision you make can cause your score to fluctuate. Below are a few examples of why someone’s credit score might change. 

Credit Inquiries

Whenever a creditor, lender, or service provider accesses your credit report and scores, it’s considered an inquiry. You’re permitting creditors to view your history to determine your eligibility and risk level. Although an ordinary and necessary practice, each inquiry can cause your credit score to decrease by as much as five points. 

Major Life Purchases

When you apply and get approved for major life purchases like a mortgage, auto, or student loan, you’ll notice significant fluctuations in your credit score. That’s because these are high-balance loans for tens of thousands of dollars. So, initially, you’ll see a drop in your score. The balance decreases as you begin repaying the loan, and your credit score increases. 

Payment History

Another factor that causes significant changes in your credit score is your payment history. For every financial account you have, the credit bureaus record your payment amounts and frequency. Ultimately, paying less than the minimum amount due or missing payments will result in your credit decreasing by as much as 180 points. 

Five Secrets To Increase Your Score

Credit inquiries, major life purchases, and payment history are only a few factors that can cause a credit score to fluctuate. Although a fluctuating credit score is typical, a score that drops too low can prove detrimental to your financial wellness. Fortunately, these five little-known secrets can help you turn things around. 

• Credit Builder – Credit builders can improve your score like those offered by ONE. It’s a sub-account you can add to your existing account (meaning no inquiries). You add money to the credit builder and make bill payments and other purchases. Your payment history is reported to the credit bureaus, and your score improves over time. 
• Minimize Credit Applications – credit inquiries remain on your report for up to two years. While it’s sometimes necessary to apply for a credit card, line of credit, loan, or service, try to keep it to a minimum. For instance, instead of putting in 10 different loan applications, narrow it down to the top three lenders. Reduced inquiries result in a better score. 
• Dispute Inaccuracies – Reviewing your credit reports at least once a year is ideal. Many consumers report discrepancies on record that have ruined their scores. Whether it’s an account you never opened or one that was resolved years ago, disputing these inaccuracies can increase your score. 
• Auto-Pay or Scheduled Payments – Missed payments likely cause the biggest decline in a person’s credit score. While there are many reasons a person could fall behind, sometimes you simply forget you have a bill due. Using auto-pay features or scheduling payments can ensure that you remain on track with your accounts. 
• Increased Credit Limits – If you’re good with money and have had a credit card or line of credit for a while, you could request a limit increase. Whether it’s an extra $300 or $3,000, it increases your credit utilization rate (the amount of credit used vs. available). The lower your utilization rate, the higher your score. 

No matter how you slice it, credit histories and scores are an essential part of life in the US. It’s a report of your financial accounts and creditworthiness and is necessary to acquire everything from credit cards to mortgages. If your credit score is constantly fluctuating, nonexistent, or extremely low, the five little-known secrets above can help you turn things around for the better.