Your credit score is one of the most important numbers attached to your name. That’s because this rating can determine how likely you are to get a loan, as well as the interest rates of such loans. A high credit score can be difficult to maintain, but we’ve put together a list of tips for improving your credit score as much as possible.
The Fair Isaacs Corporation (FICO) developed the standard metric for credit ratings. Credit scores range from 300 to 850. It is generally determined by the following criteria:
Payment History (35 percent)
Amounts Owed (30 percent)
Length of Credit History (15 percent)
Types of Credit Used (10 percent)
New Credit (10 percent)
The most important factor is whether or not you pay your bills on time. Of course, lenders also consider things like the age of your credit accounts, the overall amounts you owe, the variety of accounts (e.g. credit cards vs. mortgages), recently opened accounts, and more.
How Can I Get A Good Credit Score? To begin with, always pay your bills on time. Late payments often have the biggest impact on your credit score, so be sure to use automatic or scheduled payments when possible.
Keep balances low if possible. This is especially relevant for revolving credit accounts, like credit cards, as this specific type of outstanding debt makes lenders wary.
Only apply for credit when absolutely necessary. The more accounts you have, the worse it can look. Also, be aware that multiple credit inquiries can affect your credit score negatively, so be cautious when running credit checks.
Pay off your debt, don’t just move it around. You should never borrow money to pay for credit accounts, as this can quickly snowball. Talk to a financial advisor if your bills start getting out of control—it could save you money in the long run.
Keep in mind that improving credit takes years and years of work. It’s important to borrow wisely, especially because some debt may not affect you until years down the road. You should also check your score regularly. It’s not uncommon to find inconsistencies which lead to bad scores. With these tips in mind, you can significantly improve your rating.
Whether you have bad credit, good credit, or no credit, Sunny King Honda's Finance Department can help you get the financing you deserve. Our finance staff is highly trained and ready to work for you. If you have questions about the financing process, they'll be happy to help!