When applying for a mortgage, personal loan, student loan, car loan, credit cards, or insurance your credit score will play a role in determining your rate, terms and whether or not you get approved.
Lenders, insurers, and others will charge you more or possibly even deny your application with a low FICO score.
Scores range from 300 to 850 - the higher the better, with anything above 760 being the most desirable.
To boost your score: 1.
Keep your debt ratio vs.
your credit limit low.
If you can't pay off your total balance in full every month, at least keep it under 30 percent of your total credit limit.
Also, don't close out a credit card account when you transfer the balance to a lower-rate card.
That's because your total balance stays the same but your credit limit goes down when you close an account.
2.
Pay your bills on time.
If possible pay off all balances in full, but at the very least pay the minimum monthly due.
3.
Don't have just one credit account.
Consider opening another credit card or two, or taking out a small bank loan.
Lenders ideally like to see a potential borrower responsibly managing a mix of revolving debt (such as credit cards, where you can reuse the credit after paying it back) and installment debt (such as a car loan or most mortgages, where you pay the same amount every month for a certain period).
4.
Don't close out old credit accounts.
Old credit accounts count more than newer ones in your credit score.
Lenders prefer borrowers who have credit history and have responsibly managed the same accounts for years.
That's a more reliable indicator of creditworthiness than a few months of exemplary behavior on a new account.
Accounts open less than six months will hurt your score somewhat.
Those open at least two years will help your score.
5.
Avoid applying for a lot of new accounts or loans in a short period of time.
Every time you apply for new credit, your score may be dinged.
6.
Check your credit report periodically for discrepancies or inaccuracies.
You may not be aware of an inaccuracy that has been reported to one of the three credit bureaus (Experian, Transunion, and Equifax) and might have negatively impacted your credit score.
This is also a good way to check if you have been the victim of identity theft and accounts have been opened in your name without your knowledge.