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Increasing your Credit Score

Know your score - and raise it. 

Congratulations! You’ve just graduated from college, and you’re starting a real job. Your life as a grown-up has officially begun.

So now it’s time to boost that credit score.

You’ve probably heard that term. And you probably know it’s an important number.

Basically, a credit score is a statistical figure that measures a person’s creditworthiness based on his or her borrowing history. The most commonly used credit score ratings is known as a FICO score, named after the Fair Isaac Corp., the company that developed it. The higher the score, the more financially trustworthy a person is considered to be.

Why is your credit score important? Very simply, the higher the score, the more likely you are to get a good rate on a credit card, auto loan or mortgage, or on a loan that could help you start a business.

Keeping score

The first step: Know your credit score. There are three credit agencies, and each year you can get one free copy of all three reports from annualcreditreport.com. If you find a mistake, such as a paid-off debt appearing unpaid, contact the lender or creditor that reported the inaccurate information and ask for it to be corrected. Also, each credit bureau has a form on its website for submitting disputes.

Once you know your score, you can look for ways to boost it. There’s no single strategy, and the approaches you choose will depend on your particular life circumstances. But the overarching aim for building your score is to use the credit that’s available to you — and not abuse it.

On time, every time

One strategy for building your score is to take out a small loan from a bank or credit union and pay back your installments on time. Paying your outstanding debts promptly is another great way to raise your score. So keep your monthly student loan and other debt payments up to date. If you can pay a little extra each month, so much the better. In fact, paying all your bills – utilities, rent, car payment – on time can help improve your creditworthiness.

One word: Plastic

If you don’t have one already, apply for a credit card. The more you use that plastic, the more you’ll raise your score. It’s another effective way to build up your creditworthiness.

But this strategy works only if you pay your monthly balance in full each month. In some cases, it might not be possible to pay in full each month—things happen to everyone. Still, keep that balance at zero whenever possible.

In time, you’ll want to request an increase in your card’s credit limit. That’s something credit agencies will look favorably upon too. But that shouldn’t come with an increase in your credit card usage. Keep your balances low and manageable.

Avoid temptation

By now you’re probably seeing a pattern. Debt is only good as long as you can pay it back. At the same time, however, managing debt requires other good financial habits, such as monthly budgeting.

It also pays to think twice before you use your credit. It’s tempting to use your credit card to go on road trips, enjoy meals at stylish restaurants and partake of other spendy pleasures.

And if you get behind on your payments or if you carry high credit card balances, you’ll put your credit at risk. A low credit score can take years to fix. And that can keep you from reaching your goals and fulfilling your dreams.

In summary, the long-term benefits and peace of mind that come with a strong credit score far outweigh the short-term thrills of overspending.


Created and compiled by Rachel Rue, cuLearn and a talented writer/editor


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