Five steps to improve your credit

Your credit history is an important indication of your financial health; it tells lenders how responsibly you use credit. A higher credit score on a range of 300 to 850 may increase your options for lines of credit or loans. The good news is that no matter what your score, you can always work to improve it with these five simple steps:

1. Review your Reports

Once a year, you can pull a free copy of your credit report from each of the three reporting agencies (Experian, Equifax, TransUnion). Then, you can check your credit history and see what’s affecting it so you know where to improve. You can also dispute any errors that may be on it.

2. Prioritize your Payments

One of the biggest factors in credit score calculation is payment history. Always pay at least the minimum balance due on all loans and credit card balances on time. Consider signing up for auto pay, setting monthly reminders or due-date alerts to help you remember.

3. Curb your Usage

The second most important factor affecting your credit score is credit utilization. The simple way to lower your overall usage is to keep your credit balances paid in full, or only use 30% or less of your overall credit card limit.

4. Limit your Requests

Apply for new credit sparingly as it will be recorded as a hard inquiry on your report and could potentially lower your score. Only apply for credit when you really need it. In addition, don’t close out any old accounts because they will show responsible credit history. The longer the age of your credit history, the better.

5. Consolidate your Debt

If you have too many credit cards and loans to keep track of, you might consider transferring it all to one card or loan with a lower interest rate to catch up on past due accounts and make monthly payments easier to manage. Plus, you will have an actual end date to your debt by consolidating. Be sure to check balance transfer fees before you switch.

Most importantly, stay the course and be patient. It could take weeks or even months to see an improvement in your credit score. Remember that each step you take is a step in the right direction towards good long-term credit habits and stronger financial health. Every month that you pay your balances on time, keep a low usage rate and limit your credit card applications is positive progress towards a better score.