Now that the new year is here, it's a good time to improve your financial standing. One of the best ways to do so is to improve your credit score. Consider the following tips.
Avoid Getting Too Close to Your Credit Limit
Don't max out your credit cards. As a matter of fact, it's a good idea not to get too close to your limit.
"Credit scoring models look at how close you are to being 'maxed out,' so try to keep your balances low compared to your total credit limit," says the Consumer Financial Protection Bureau.* "If you close some credit card accounts and put most or all of your credit card balances onto one card, it may hurt your credit score if this means that you are using a high percentage of your total credit limit. Experts advise keeping your use of credit at no more than 30 percent of your total credit limit. You don’t need to carry a balance on credit cards to get a good score. In fact, you don’t need outstanding debt at all. Paying off the balance in full each month helps get you the best scores and keeps your interest costs as low as possible."
Pay Down the Debt You Have
Try to keep all of your debts to a minimum. It's a good idea to keep your credit utilization rate (the percentage of available credit that you're using) below 30%. This is one of the biggest factors in your credit score. Use the new year to pay down higher-interest debt and improve your credit utilization. Start paying off accounts with the higher interest rates or the smallest balances first. Try to allocate more of your income to paying off debt early in the year to set yourself up to be in a better financial position later.
Automate Payments
Late or missed payments will damage your credit score, so make sure you are paying on time. One way to make sure that you never miss any is to automate them. As you're going through your new year's resolutions, add setting up automatic payments to your list. If you are concerned about bank account overdrafts, you can set up reminders on your calendar to make sure you have the funds to make the payments.
Keep Your Oldest Credit Card Account Open
As Experian** explains, "Length of credit history makes up 15% of your FICO Score and is heavily influenced by the age of your oldest account and the average age of all of your accounts. While loan accounts are typically closed once you pay off the debt, you can keep credit cards open indefinitely. Closing a credit card can hurt your credit score, especially if it's one of your oldest tradelines."
It goes on to suggest using your oldest card every few months or putting a small recurring bill on the card to keep it active, even if you no longer use the card on a regular basis.
Utilize Nevada State Bank's Credit Score, Powered by Savvy Money
Nevada State Bank recently launched Credit Score, powered by Savvy Money. This lets you access your credit score, get a full credit report, and benefit from
credit monitoring, in addition to getting financial tips and other educational materials all from one powerful tool, with no impact to your credit . You can get instant access to factors impacting your credit score with detailed recommendations, education to clarify how your credit score is calculated, and more. Benefits include:
- Daily access to your credit score
- Real-time credit monitoring alerts
- Credit score simulator
- Personalized credit report
- Special credit offers
Just sign in to digital banking, click or tap “See Your Credit Score," and use the site to access your credit score and other features.
The new year is a great time to take steps to improve your credit. Use the tips above and our new tool to get your credit in great shape.
* https://www.consumerfinance.gov/ask-cfpb/how-do-i-get-and-keep-a-good-credit-score-en-318/
** https://www.experian.com/blogs/ask-experian/credit-education/improving-credit/improve-credit-score/