A good credit score is often the ticket to lower interest rates, more attractive insurance premiums, and the best credit card rewards programs. With particular regard to interest rates, having a good credit score can save you thousands over the long run. But what if you miss the minimum credit score for certain programs or benefits, by just a point or two? You might wish you had worked on your credit a bit more.
We all know that building a solid credit history requires years of diligence. But if you just need a couple points added to your score, it is often possible to do this within a few months time. And the best part is that these tips will only require about an hour of your time – perhaps even less.
Become an authorized user on someone else’s account. If your spouse or another close relative has earned an excellent credit score, ask if you can be added to an account or two. Becoming an “authorized user” on someone else’s credit card means you benefit from their stellar habits and payment history. And, you don’t even need to use the card or have possession of it.
Of course, you should remember that if this person defaults on the account, that will also impact your score.
Pay down your own debt. Credit bureaus determine your score using many different factors. One of these is your ratio of credit use to credit availability. So, if your card balances are up near the limits, this can knock down your score by a few points.
Make the decision to skip a vacation this year, or devote a tax refund or work bonus to paying down your balances. It can hurt a bit to deny yourself an extra treat, but a boosted credit score can pay off for years to come.
Request a credit line increase. Working with the above principle, another way to obtain a better ratio is to increase your available credit. Ask your card company if they can offer you a credit line increase without doing something called a “hard pull” (which will actually knock your score down by a few points). If they do need to do a hard pull, skip the increase. And whatever you do, don’t ask several companies for a credit line increase all at once.
It’s important to remember that the effectiveness of these tips will vary from one person to the next, and that consulting a professional credit counselor can help you identify your best options. In the meantime, please contact us if you have any other questions about long term financial planning.
