Maintaining a high credit score not only brings you peace of mind, but also lets you enjoy perks like lower interest rates and better loan terms. If you have recently started using credit products as a young adult, you might want to learn the ropes of maintaining a high credit score in order to set a stable financial foundation for your future.
To help you along the way, here are 10 simple steps to improve your credit score before 30.
1. Make Your Payments on Time
Learning when to make credit card payments and loan payments is one of the most effective things that you can do for your credit score: You should make your payments as soon as you can, well before the due date. With it, you should also try to settle your credit card balances in full every month.
2. Dispute Reporting Errors
While your credit transactions are sent to three major credit bureaus, the reporting might not always be accurate from the side of your lender or other institutions. That is why, you should request a credit report from these credit bureaus and identify any errors like incorrectly reported delayed payments that you have already settled in the past.
3. Be Careful While Applying For New Credit
While it might be tempting for you to apply for new credit cards and loans to fulfill plans like putting funds in a high-yield savings account, borrowing new credit can lower your credit score. This effect can lower your score for typically a year, while the hard inquiry itself continues to show up on your report for up to two years.
4. Have a Good Credit Mix
You need to have a good credit mix to improve your credit score. This includes at least one installment credit product like a home loan and at least one revolving credit product like a credit card. Besides being careful about applying for new credit, you can shop around for the lowest interest rate loans to make smart decisions.
5. Maintain a Low Credit Utilization Ratio
Your credit utilization ratio defines how much of your credit limit you have used. For example, if your credit card limit is $1,000 and if you use $200 from it, your ratio gets to be 20%. Ideally, the credit utilization ratio across all your accounts should be less than 30%, but you may also take the safer route and have it less than 10%.
6. Consider Maintaining Your Oldest Credit Account
Your oldest credit account builds your credit score by contributing to the overall age of your credit history. To manage your oldest credit account without any problems, make timely payments and don’t use an amount that increases your credit utilization ratio past the 30% limit. You can get help from a personalized budget planner to achieve this feat.
7. Increase the Limit on Your Credit Card
To easily lower your credit utilization ratio, you can ask your current lender to increase the approved limit on your credit card. Many lenders can do this without triggering a hard inquiry, which makes sure that you don’t even get a temporary drop in your credit score. This also saves you from having to check new credit card requirements for credit score.
8. Become an Authorized User on Someone Else’s Account
A quick way to improve your credit score without a hard inquiry on your account is by becoming an authorized user on someone else’s credit card. This could be your spouse, friend, or family member. But you need to make sure that you don’t use the approved amount to the point where you create problems for the original owner. You can use a budgeting app to properly manage your funds.
9. Report Rental Payments
Typically, your credit card and loan payments are reported to the three major credit bureaus. But you can also report other payments like your rent and utility bills to improve your credit score. This doesn’t have a dramatic effect on your credit score, but it can definitely add up to improving it in the long run.
10. Keep Checking Your Progress
Make sure that you keep checking your progress by looking at your credit score at least twice a year. This helps you figure out if you need to make any changes to the way you have been handling your finances. If you want to reach a higher credit score range before taking out a large loan like a mortgage, this practice helps with that as well.
By learning these tips, you can improve your credit score before you reach 30. This can help you build a comfortable financial future for yourself.