Understanding Your Credit Score – Part 2

In our last blog post we discussed the top three factors used to calculate your credit score. Your credit score is a number between 300-850 that gives lenders an idea of your ability to repay loans in a timely manner. The higher your score, the better chance you’ll have of securing a loan with a lower interest rate, which means you’ll pay less money in interest over the life of the loan. 

Typically, scores above 700 are considered good; scores above 800 are considered excellent. Scores below 640 are usually considered in the ‘needs improvement’ range, and can prevent borrowers from getting better rates. 

If you want to improve your score, it’s important to consistently demonstrate responsible financial behavior by doing a few things like always paying your bills on time and not having too much debt. Below are four ways to improve your credit score — and maintain a good score once you’ve gotten it where you want it:

  1. Pay Every Bill On Time – Your payment history is one of the top factors when calculating your score. Set up auto pay and reminders so that you pay each bill on time every month.
  2. Don’t Close Accounts with Good Histories – Closing an account isn’t always best for your credit score – particularly accounts with good histories. When you close an account it’s usually removed from your credit report, and that means you lose the credit history with that account.
  3. Keep Your Credit Utilization Below 30% – Your credit score may take a hit if your monthly statement balance is over 30% of your limit, even if you pay off your balance each month. Why? Because most likely, your statement balance has been reported to the credit bureaus and they like to see balances of less than 30% of the limit.
  4. Apply for Credit Only When Necessary – While having a mix of credit lines is good for your score, remember, if you apply for multiple lines of new credit, your score can take a hit.

As a renter, you can also improve your credit score by having your rent payments reported to the credit bureaus with a solution like RentReporters. Find out more at https://www.rentreporters.com/price/.

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