If you want to improve your credit score, you’re in the right place. There are a lot of ways you can boost your credit score – and there are a few techniques and methods that you may not even be aware of! So, in this guide, we’ll take you through a few top little-known tips that can help you boost your credit score in 2020. Read on and get all the details!
1. Completely Pay Down Your Credit Cards Every Month
If at all possible, you should always pay your credit cards in full every month – rather than making minimum payments on your credit cards. Why? Well, the most obvious benefit is that you’ll save money on interest. If you pay your credit cards each month in full, you won’t pay a dime in interest – and that’s money you can save for other purposes!
But beyond this, paying down your credit cards completely has a benefit for your credit score, too. It reduces your “credit utilization,” which is a big factor in your credit score. Basically, if you have a $10,000 credit card limit, and you have $5,000 of credit card debt, your credit utilization is 50%.
But if you have a $10,000 limit and pay your cards off in full every month, your utilization rate is 0% – and lower is always better when it comes to credit utilization. A low credit utilization rate means that you’re consistently paying your debts down on time and can help boost your credit score!
2. Set up Automatic Payments for All of Your Bills
Another major factor in your credit score is on-time payments. According to consumer credit company FICO, a single 30-day missed payment could drop your score by up 100 points or more.
So how can you eliminate the risk of late payments? We recommend setting up automatic payments for all of your bills – from health insurance to car insurance, rent or mortgage payments, credit cards, utilities, and any installment title loans or short-term loans you may have.
If your payments are automatically taken from your account every month, you’ll never have to worry about a late payment again – and you can boost your credit score!
3. Never Close Down Unused Credit Cards
If you pay off a credit card, you may be tempted to close the account, particularly if you don’t plan on using it again. But this is a mistake. The length that your credit accounts have been open is a major factor in your credit score.
For example, if you have two credit cards – one that you opened 3 years ago, and one that you opened 7 years ago, the average length that they’ve been open is 5 years. But if you close the 7-year-old account, the average length drops to 3 years – which can negatively affect your credit score.
So instead, don’t close the account – as long as it does not have an annual fee, you can use it to make an occasional purchase and then pay it off right away. This will help boost your credit score as the length of your open accounts continues to increase.
4. Enhance Your Credit MIX with Different Types of Loans
If you only have one type of loan or credit card, you may have a bad “credit mix.” This term refers to the different types of loans that you have now and have had in the past.
For example, a good credit mix may include two credit cards, a mortgage, a personal loan, and a car loan. There’s a good variety of different loans in this mix, so you will have a higher score.
In contrast, if you only have a single student loan and no other credit, your score may be lower, since you have not shown your ability to take out and repay different types of debt.
If you need to improve your credit score, taking out an auto loan, short term loans for a home improvement project, or other types of instalment loans can be a good option.
However, you should never take out a loan unless you need it, so don’t just take loans to try to build your credit score. Make sure you’re making a good financial decision before you decide to borrow money.
5. Check Your Credit Report for Inaccuracies & Errors
You can request a copy of your credit report for free each year from Annual Credit Report. You should always check your credit report and see if there are any inaccuracies – such as late payments that you actually made on time – and submit a request for correction.
If you manage to find any issues, correcting inaccuracies and errors on your credit report is a great way to quickly boost your credit score.
Follow These Tips to Enhance Your Credit Score in 2020
With these simple steps, you can improve your credit score and qualify for better rates on loans and credit cards in 2020 and beyond. So, take another look at these tips now, and think about how you can use them to boost your credit score today.