Whether you want to buy a house, a car, or rent an apartment, you need a good credit score. If you don’t have a high score on your credit report, that doesn’t necessarily mean you can’t buy big-ticket items or find a place to live. But it does mean that you’ll pay more to buy the same items as someone who has a better track record with the credit bureau.
The good news is that a less-than-stellar credit score doesn’t have to be permanent. There are some easy ways to raise your score, and all it takes is a little time for your number to rise.
Unpacking Your Credit Score
To increase your credit score, you first have to understand it. The score is a number between 300 and 850 that tells the bank how risky it would be to loan you money.
A low credit score tells the lender that if the bank loaned you money, they have a higher likelihood of never seeing that money again. On the other hand, a high credit score tells the lender that they will have little trouble with repayment.
If you had money troubles in the past that affected your credit score and you’re ready to bring it up so you can make purchases at a decent interest rate, follow these steps.
Check Your Report
First, request a copy of your credit report from the three main credit bureaus: Equifax, Experian, and TransUnion. You can get a free credit report that won’t affect your score for free once every 12 months.
Examine the report and look for anything that doesn’t belong there. If there are items you don’t recognize, be sure to dispute them. Doing so will start the process to remove them and possibly raise your credit score.
Look at each item from a strategic consulting perspective by analyzing your spending, debt, and payment habits. Decide what needs to change to make you look like a good risk for any lender.
Make Payments on Time
Whether it’s your credit card, water bill, or doctor bill, pay everything on time going forward. Set as many automatic payments as you can so you have less to worry about when it comes time to pay your creditors. Paying on time isn’t going to raise your score immediately, but it will over time if you are consistent.
Don’t Close and Don’t Open
It might be tempting to close open lines of credit you don’t use anymore to show the bank you don’t have extra credit sitting around — but that would be a mistake. What you want to do is show the largest gap you can between the debt you have outstanding and the amount you could have outstanding. That shows the lender you have the means to repay the loan they’re considering for you.
That said, don’t open any new lines of credit because that will negatively affect your overall score.
Give It Time
There’s no magic technique to immediately raise your score and make you look good to a lender or a potential landlord. That doesn’t mean you can’t borrow money or make purchases with a low credit score — you can. The problem is that you will have a high interest rate and end up paying more over time.
But if you’re patient and can wait to borrow until your credit score climbs, it will save you money, and you’re more likely to qualify for that apartment you have your eye on. So, stay consistent and diligent with your finances, and before you know it, you’ll be in a good position to make big-ticket purchases.