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5 Ways to Improve Your Credit Score

Hello everyone and welcome to Ask Abby, we have a particularly awesome show for you today with some cool new features that break down some of these nitty gritty topics into really unique, easy to consume animations. We have shared a couple of Basic finance’s videos in this credit score series, so you may have seen them before. If you haven’t, check out our Basic Finance Youtube channel: https://www.youtube.com/channel/UCaxQtBPzOWudXSZkxBjecsA and like our Facebook page to get notifications for our Ask Abby show because we will continue to have great content like that in the weeks ahead!

Today, we are talking more about credit scores but BEFORE YOU TUNE OUT because you’re thinking, “jokes on you, I don’t care about my credit score”I’m going to convince you why you should care…. Hopefully, at least. That’s what last week’s episode was about, why you should actually care about your credit score, even – or especially – if it’s in the 3-4-500 range and even if you’re not planning to make a big purchase like a home or car soon. 

Why you should care about your credit score: https://www.youtube.com/watch?v=go7IIvJQUF4. Also, if you’re sitting there going, I have no idea what a credit score is or how it works, watch this video: https://www.facebook.com/creditanddebt.org/videos/297509481376175/

Now that we’ve got all that out of the way, we are going to dive into today’s show, which is about 5 Ways to Improve Your Credit Score.  

The good news is, if you have a 3-4-500 credit score and you’re now in agreement that you should care about it, there are steps you can take to start working in the right direction of an improved credit score. Your credit score is not static, and as things change for you financially, your credit score will fluctuate as well. As your score fluctuates, the range in which you sit, fluctuates as well. So, with each step forward, you make progress towards a new credit score range.

FICO score ranges

There are several models for credit scores ,for example FICO and Vantage score, and each vary slighty, but for today’s video you’re using FICO just to keep things consistent as we talk through them. So, FICO credit score ranges vary from 300-579 for poor, 580-669 for fair, 670-739 for Good, 740-799 for very good and 800-850 for exceptional. 

Now, the biggest thing when looking at this chart is to not get discouraged. Not only is your credit score dynamic and always changing, but 33% percent of people sit in that poor to fair range, so you’re not the first person there and you certainly won’t be the last. That doesn’t mean, though, that you shouldn’t work toward improving your situation, right? 

Now that you know where you sit, let’s talk about how to get that number moving in the right direction with some ways to improve. We are going to talk about simple ways to improve your credit. There are things you can definitely do long-term, but we are really focusing more on the “right now” changes to make and hopefully see some immediate improvement. So check your credit report for inaccuracies.

The number one way to improve your credit is to check your credit report for inaccuracies. I think we talk about this every week but seriously, if you’ve never looked at your credit report, now is the time. It’s FREE on www.annualcreditreport.com.

Voice over: Usually you can only get your credit report for free once a year, but right now, you can get a free credit report on annualcreditreport.com every week through April of next year. Types of inaccuracies on credit reports include: 

  • Incorrect Personal Info
  • Accounts that aren’t yours
  • Closed accounts reported as still open
  • Duplicate accounts
  • Inaccurate payment history 
  • Outdated balance or credit limit info 

There are a few types of errors you should be on the lookout for when you get your credit report. The number one is Incorrect personal information. If your personal info is wrong, the credit bureau might have confused you with another person, which means your credit score could be all wrong! You’ll definitely want to check that out. 

Some other things to be on the lookout for are accounts that aren’t yours, because if your information was found, someone could have opened an account in your name and you wouldn’t have known it. Scams are super active right now and personal information is more vulnerable than over, so look closely! Also check to make sure that there aren’t any accounts on your report than you closed in the past but still show as open. While you do that, you can also check for duplicate accounts. Duplicate accounts can raise your credit utilization ratio, which is a major factor that affects your credit score. So let’s say you have one credit card maxed out, meaning your credit utilization for that account is 100%, a duplicate account like that will show that you have TWO accounts at 100% which could drop your score a ton. Last couple of things to check for are Inaccurate payment history and outdated balance or credit limit info. So just make sure that all that looks good. You can cross check those last few with your credit card and loan statements just to be sure.

1. Check your credit report for inaccuracies

So, CHECK! Number one to improve your credit score is not only simple but it’s also free and fast, so why not? If there’s nothing you can do to improve your financial situation because you’re just overall in a tight spot, one thing you can certainly do is check your report. If you need help navigating your credit report, our coaches can absolutely help you do that! So if you’ve never looks at in before or if you’re not really sure what you’re looking for, give our coaches a call and we can help point you in the right direction.

Alright so number 2 way to improve your credit score. We are going to talk about payments. There are alot of factors that go into payments and your credit score. Paying your stuff on time, communicating with your lenders about payments, getting a payments deferred, all these steps can ultimate have some sort of affect on your credit score, so rather than breaking each of those out, we are going to say:

2. Plan your payments

The second way to improve your credit score is to plan your payments. There are a few ways to that that: 

  • Schedule automatic payments
  • Set calendar reminders 
  • If something changes, communicate with your lender

Number one is to schedule your payments to automatically withdraw from your bank account or payment method. Most banks offer a bill pay option, in which you can sync up your account and let the system know when you’d like to make a payment. A lot of other online sites for things like car payments, cell phone bills, etc. allow you to input a payment method – like a credit or debit card – and schedule your payment to withdraw automatically. 

One of the easiest ways to ensure your credit score is heading in the right direction is to make sure you never accidentally miss a payment. So, for those account NOT on automatic withdrawal, set up a calendar reminder in your phone or email to remind you to pay your bills monthly. It’s also not a bad idea to set a reminder in your phone for the payment that DO come out automatically. That way, you know  exactly what to expect when looking at your accounts.  Lastly, it’s important that if something with your payment schedule changes, communicate with your lender.

Unexpected things happen, especially in today’s atmosphere. Whether you’re facing a reduced income, a layoff, or unexpected expense that will prevent you from paying a bill, CALL your lender before you do anything else. A missed pyament can affect your credit score, but sometimes, if you communicate proactively, your lender will work with you to set up a payment plan, waive late fees or even defer your payments, which can prevent a negative  ding to your credit score. 

So #2 has three things in it guys, but the overall message is just make your payments and if you can’t, communicate with your lender because a late payment doesn’t HAVE to negatively impact your credit score if you’re proactive. 

3. Pay down your debt 

So, the third way to improve your credit score is to pay down your debts. There are a few different methods to successfully pay down your debt. Some of them, you should be cautious, because they may initially hurt your credit score, but in the long run, they could make things move more quickly in the right direction. 

Debt Snowball and Debt Avalanche. A couple of things you can do on your own are the debt snowball vs. debt avalanche methods. Shout out to Dave Ramsey for these great methods! A debt snowball method basically says that you should make minimum payments on all accounts, and really focus on starting to paying off your smallest debt first. Meaning the account with the lowest balance. This will improve your credit because you’ll be reducing your credit utilization ratio! That’s good news. After you pay off one account, you allocate those funds to the next account, and so on and so forth, until all your accounts are paid off. A debt avalanche is similar, except that you start with the focus on your highest interest accounts. Whichever method you choose, we have one big heads up. 

PROCEED WITH CAUTION! 

Have red lights maybe and a siren? Let’s chat about it. Don’t close any of your accounts until your debt has been reduced significantly. Closing accounts when you still have high balances on other accounts can increase your credit utilization ratio and end up hurting your score! 

So with that warning, we can talk about one other big way to reduce your debt and that’s by talking to our coaches. I say it every week but our coaches will give you a free analysis of your debt and layout all of your options. So if you have $1,000 in debt or $100,000 of debt, our coaches will give you your options and let you know how long it’ll take for you to pay that off with some various strategies, plus, they will talk you through how your credit score might be affected in each case. IF you have questions on this one, please throw them in the comment bar! And I’ll get to them as we dive in to #4 

4. Ask for increased credit limits 

There are a few ways you can get an increased credit limit, and in turn, increase your credit score. If you have a credit card, go to the servicer’s website, login or create an account and navigate to where you have your account information or credit limit information. Sometimes, it’s as simple as the push of a few buttons! You can click “increase credit limit” or something or sometimes it says “request a credit limit increase” or something along those lines and you either just request an increase and they’ll let you know what you’re approved for or you can type in your request and they’ll approve or disapprove. Obviously, if you’re account isn’t in the best standing, they won’t likely approve you for an increased credit limit. But if you’ve been paying on time are in in decent shape, they might give you a bump which could them bump your credit score up a bit. 

Lastly, #5 way to increase your credit score quick and easy. We are going to wrap this up with an overarching tip to increase your credit score altogether and long-term is 

5. Avoid new hard inquiries

To avoid hard inquiries on your credit. Hard inquiries happen anytime a lender or services checks your credit to figure out if you’re eligible to qualify for their product or program. When they do that, it’s inevitable it will ding your credit, whether you have good credit or bad credit! 

The other major thing to consider is that new hard inquiries can stay on your credit report for TWO YEARS, so really chose carefully when you are trying to decide what’s important. You’ll have a hard credit inquiry for loans, store cards, travel cards, fuel cards, etc. One thing to note is that for secured debt, like a car or mortgage, you can have multiple inquiries over the course of – usually – 14 days or so and they only ding your credit once. That said, try to have a conversation with a lender prior to applying to see if you’re in the ball park range before they go through with the hard pull. There are so many ways to check your credit score for free, so make sure you know where you stand prior to making any major financial decisions. 

So, that’s our show today, 5 ways to improve your credit score, especially if it’s not a great score and you’re ready to make some money moves in the right direction.

Recap: 5 Ways to Improve Your Credit Score:

  1. Check your credit report for inaccuracies
  2. Plan your payments
  3. Pay down your debt
  4. Ask for increased credit limits
  5. Avoid new hard inquiries

Just to summarize the show for you, here are the 5 main ways to improve your score, check out that credit report because ITS FREE so hello. Plan out your payments, whether you can make them this month or not, plan ahead. Pay down your debt. You can do it on your own or call our coaches and we’ll map it out for you (ALSO FREE). Ask for increased credit limits. The worst they can say is no! And lastly, avoid new hard inquiries, or just make sure to know where you stand and plan your inquiries in advance. Know what’s a priority and what’s not as important.

That’s our show today guys, thank you so so much for tuning in. As always, please make sure to like and comment our page. Today’s show was a unique new way to get you all some content so please let us know if you liked it or if you didn’t, I want to know! If you have questions, you can comment on this post or even email me directly at askabby@creditanddebt.org . Tune in next week for our show – we are going to start on a brand new series and hopefully answer all your student loan questions! Thanks again and we will see you next week on Ask Abby

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