Often, we tend to forget that our credit score is constantly changing and evolving depending on how we handle our finances.
Whether we’re starting a new business, buying a new car, or purchasing our first home, the number our credit score sits at is critical. Your credit score matters, so let’s explore three ways to increase your points.
Pay Down Revolving Credit Lines
Your revolving credit balance is essentially the balance you carry throughout time. For example, if you made big purchases on your credit card that you weren’t able to pay down immediately, the unpaid portion of your balance carries over into the next month and so on until you pay it.
However, if your credit line requires you to pay interest on your revolving balance, the amount you owe just builds up like a snowball, lowering your credit score the longer you carry it, depending on how close it is to your credit limit.
This scenario is understandable—life can get in the way, and you sometimes need to make a big purchase on your card that you can’t pay back right away. That’s okay. What you can do now is make an effort to pay down your revolving balance as much as you can to increase your points.
Request a Limit Increase
This option might be best if you can trust yourself not to max the new limit and your credit score isn’t on a downward-trending rate. The reason why requesting a limit increase can help boost your score is that it decreases the utilization ratio, which heavily impacts your score over time.
For example, most people recommend using 30 percent maximum of your credit line to maintain a healthy score. So, if your current limit is $2,000, you may ask your credit line to increase it to $4,000 so that your balance may sit at only a 30 percent utilization ratio.
Pay Off Lowest Balance First
You may consider paying off the credit line with the lowest balance first and only paying the minimum payment on the rest of your balances. This ensures that you tick off one balance at a time rather than paying a hefty amount toward every line. Additionally, when you see that you’ve paid off a balance in full, it motivates you to keep going and enables you to have more money to put on your next balance and so on.
Our credit scores affect almost everything in our lives, so if you’re considering starting a business, you’ll need to know how your score affects interest rates on hard money loans.
These three ways to increase your credit score points will help you understand that your credit score matters and why your effort will pay off down the road. Keep working toward your financial goals, and you’ll reach them in no time!