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Your credit score is important for a lot of financial needs. Here are three tips to boost your credit score in 2023.
If you’ve not been paying attention to your credit score, you need to start doing so. This is an important part of your financial information. It’s going to help you get better rates on loans, boost your credit limits, and could even help you secure better rentals.
The good news is you can control a lot of your credit score. There are some elements you can’t do anything about right now, but these three steps will help you boost your credit score throughout 2023.
What is your credit score?
What makes your credit score so important? Why should you give it a boost?
Your credit score is a rating given to you by financial institutions. It’s based on past payment history on credit cards, loans, and even phone or internet bills. Institutions will report payments to the likes of Equifax and TransUnion and your score is determined based on numerous factors.
When you come to get a new loan or credit card, an institution will do a check on your credit score. If it’s low, you run the risk of being denied. When you have a strong score, you’ll get lower interest rates as you prove yourself to be a trusted borrower.
3 tips to boost your credit score right now
There are some things on your credit score you may not be able to do much about right now. Let’s say you declared bankruptcy five years ago. That’s going to stay on your account for seven years at least, and it will affect your credit score. There is nothing you can do about that, so you can ignore it for now.
If you paid a loan late, that will also negatively affect your credit score. There’s nothing you can do about past problems. It’s about focusing on the “now.” Here are three things that you can do now.
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Dispute things that should be on there
You don’t want to dispute everything. Anything that you know is valid will stay. What you want to dispute is something that you know is factually incorrect.
If you were a victim of fraud, you’ll find that some payments or loans may be connected to your account that shouldn’t be there. Dispute this and show the proof that the loans were taken out in your name fraudulently.
Maybe a company misreported a payment. You want to dispute this to get it cleared from your score.
Pay your credit cards in full each month
When you get your credit card statement each month, you want to pay it off in full. This is going to help you boost your credit score while saving you money. When you pay off the balance in full, you don’t pay any interest on it. Make sure it’s paid in full by the due date on your account.
If you’re struggling right now, pay as much as you can. I’ll talk about how to clear debt in the weeks to come. There are two ways that you can do it depending on the way your brain works.
But if you can, clear the credit card in full.
There’s a common misconception that you should always have a small balance that runs over each month. This is not going to boost your credit score. It’s costing you money. Your full balance reported is shared with the financial institutions. That’s the bit that counts.
Only use up to 30% of your available credit
Stop using your credit cards so much. You want to keep your credit utilization down to help boost your credit score. This is going to be hard to do if you’re in debt right now, but you can get it down with some work.
The magic number is 30%. You don’t want your credit utilization (across all debt) to be higher than this. Let’s say you have a credit limit of $1,000. You don’t want to spend more than $300 with that credit. I try to keep mine under 10%, but that’s more of a personal goal.
The best way to do this is to only spend money that you have available. Save for something, pay for it on a credit card for any points or for buyer’s protection, and then clear the purchase off right away. Yes, you can clear the purchase off right away without negatively affecting your credit score. This is another misconception.
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