A credit score is a 3-digit number that represents a person’s creditworthiness. The higher the score, the better for you. Your credit score affects more than just your ability to get loans. Insurance companies, potential employers, rental property companies, and more may all pull your credit to see if they want to work with you. If you are looking for a loan, you can be approved for lower interest rates with a higher credit score. When starting out, you don’t immediately get “A” credit. So how do you build your credit score? Here are some of the ways to easily build your credit score!   

Review Your Credit

Before you start to build your credit score, review your credit report. You can pull your credit report from each bureau once a year for free on annualcreditreport.com. Since there are three bureaus (Experian, Transunion, Equifax), you can pull your credit report three times each year. Don’t order your credit reports from each bureau all at once. Staggering the free reports is a great way to monitor your credit report throughout the year.

Besides seeing where you are with your credit, you should review your credit reports for any errors. An error on your credit report can pull your score down, and it isn’t even reflecting your true behavior. If you find an error, submit a dispute to the credit bureau. Disputes can be submitted online through the agency’s portal.  

Build a Credit History

To start building your credit score, you must have lines of credit open. When just starting out or trying to rebuild your credit, credit builder loans are a great way to start moving the needle up. Whatever amount of money you choose to borrow, that amount is held in your savings account until your loan is repaid. Once the loan is repaid, the balance of the savings account is available to use. This is a great way to establish positive payment history to help build your credit rating.  

Another great loan to help build your credit is a secured credit card. Like the credit builder loan, whatever amount you choose for your limit, a deposit of that amount will be held in your savings and earn dividends. Pay your bill on time each month and once your credit score goes up, you can switch your card over to a non-secured card and your deposit will be available for your use.    

Mix Up Your Loan Profile

Lines of credit are important if you want to see your score improve, but you also need to make sure that the loans you have vary in type because credit mix affects 10% of your score. It is important to have both secured and non-secured loans in your profile. A secured loan is when you have collateral to back the loan up. For example, a car loan is secure because you have a car to cover the loan if you default on it.

A non-secured loan does not have any collateral backing up your request, so it is a little riskier for the lender. An example is student loans because the lender can not come back to you and repossess your education. Having a mix of both secured and non-secured loans shows the lender that you are well rounded and will increase your credit score.    

Maintain older credit lines

The age of your credit accounts affects 15% of your score, so don’t be so quick to close your older credit accounts even if you aren’t using them. Lenders like to see an older average credit age because it shows them you have more experience with paying back your loans. Don’t forget they may be oldies, but they are still goodies!

Plus, if you close older credit cards that you do not use anymore, your available credit will go down and your credit utilization will go up. The goal is to keep your credit utilization at 30% or less. But when you close your older accounts it makes it look as though you have less usage, so whatever you have on other cards impacts your utilization ratio at a higher rate. To help with your credit utilization ratio, ask to increase your limit. Just remember increasing your limit won’t help if you increase your spending as well.   

 Limit How Often You Apply For New Accounts

As you add new accounts to your profile, remember to not go over the top. Make sure not to submit credit applications back-to-back. Every time you apply for a loan, you get a hard inquiry on your credit report that can affect your score by as much as 10%. Hard inquiries affect your credit score negatively for as long as a few months to two years. Make sure when you are applying for a loan that you need it and it will benefit your credit score in the long run.    

Pay Your Bills On Time

Last but not least, payment history has a 35% impact on determining your credit score. It is important to keep your bills organized and pay them on time. A great way to make sure you pay your bills on time is to set up due date alerts. This way, you will know when a bill is coming due and have a plan for it. You can also set up automatic bill pay through your bank account. Bill Pay takes away the concern of potentially being late on a payment because it automatically comes out of your account.

To build your credit score, make sure to keep these tips in mind. If you are patient and just keep working at it, you will be set for any credit need in the future.