Reap the benefits of cleaning up your credit score. It is worth the effort!
Having a healthy credit score can be one of your greatest assets. Like staying healthy physically, having a good credit score does take diligence and can be a discipline on its own. But it doesn’t have to be complicated. You can adopt essential habits to keep it “clean” and if you stay consistent. The health of your credit score can be a crucial component of your quality of life. Here are some basics to apply.
Paying your bills on time
Even a slight delay in your bill payment history could impact your credit score. Paying your bills on time can serve you in multiple ways. First, it is a great way to avoid interest and penalties. It is also the best way to build your credit history, improve your credit score and show us at momentum that you are a reliable member and business partner to extend credit to. A great way to ensure this happens is to automate your bill payments on the days you get paid.
Applying for the credit you need.
The types of debt you have affect your credit score. For example, too many credit cards could negatively affect your score. If you are using one card to repay money you’ve borrowed on another, this can become a real mess.
Opening multiple credit accounts will impact your credit score as well.
It is essential that you only apply for the credit you need and you honestly believe you can afford. Also, don’t apply for multiple credit products simultaneously, as it looks like you are trying to get as much as possible versus what you need. This brings us to the next point.
Only use what you need
The amount of credit you use is considered a predictor of default risk and will directly impact your credit score. A good rule on credit usage is that a lower utilization is better—ideally, less than 10%.
Don’t mix business and pleasure
You have heard the expression; here is how you can put it into practice in the context of improving your credit score.
You should separate your business credit from your personal credit as much as possible. Instead, use business loans, your business line of credit and business credit cards to finance business investments, purchase supplies and top up working capital.
Never mix personal needs with the business it can become a mess in terms of your credit and can have wide-ranging collateral damage. If you run your own business, speak to your accountant or professional advisor to help you draw a solid line between your personal credit needs vs business.
Check your credit report regularly BUT not too often
Credit reports can have incorrect information. Names may be misspelled, other people’s data can end up on your file, and the debt you have paid can still be listed.
It is good practice to check your credit report regularly. This will ensure the account is up to date, that all the information is correct and that you have not been the victim of fraud.
However, making too many credit inquiries with the credit bureaus can negatively affect your credit rating. Once a year is usually not an issue.
If you suspect any fraud or wrongdoing or get denied for credit, don’t wait for the year to end. Check right away.
Avoid debt collection and bankruptcy
Having unpaid bills and your debt is sent to a collection agency, your assets are repossessed or you have to file for bankruptcy will hurt your credit score.
Always avoid getting into a situation where a creditor will go after you. Collection and bankruptcy are very damaging to your credit score. So avoiding this will be critical to having a good credit score.
Be disciplined and patient. It may not happen overnight.
It isn’t easy to estimate how long it can take before someone’s credit improves significantly. Not all circumstances are the same. Start applying these principles and build your credit history as soon as possible.
A great place to start is with personal and business credit cards and keep the use low. That will generate the type of history that will be good for your personal and business credit scores.
For almost a century Momentum Credit Union has been built on supporting our members from generation to generation from all phases of growth in the lives of our members. We are here to help you in any way we can. If you have any further questions on how to help build your credit rating and the member benefits you have access to, call your MCU team.
Let’s go somewhere…together!