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Building A Good Credit Score: 5 Tips

Building A Good Credit Score: 5 Tips

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    Having a solid credit score has been important for quite a while now, but it’s actually becoming more important these days as lending tightens up. There’s a reason that the Fair Isaac Corporation — the organization that calculates the credit score that most major lenders rely on — has been changing the way that credit scores are calculated. All of these circumstances add up to the fact that even someone who is confident that their credit score is good should be making sure it stays that way. There are some relatively simple steps, though, that you can take to help yourself build up your credit score, as well as maintain it.

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    1. Get A Copy of Your Credit Report

    Although you can’t get your exact credit score for free, you can get a free copy of your credit report from each of the three credit bureaus (Experian, Equifax and TransUnion) once each year. To do so, visit AnnualCreditReport.com and request a report. AnnualCreditReport.com, by the way, is actually the only way to get your reports for free — the site was created in response to federal legislation requiring that the three national credit reporting companies inform consumers about their status. Despite their catchy commercials, companies like FreeCreditReport.com actually wind up charging you for expenses related to obtaining your credit report.

    2. Make Sure You’re Aware of Any Existing Accounts

    Typically, your credit report will show any accounts you have open — although different companies report to different credit bureaus, and some companies don’t seem to report at all. It’s easy to forget about credit accounts that you don’t actually use, like credit cards you stopped using but chose not to close the account ‘just in case.’ These credit accounts can easily represent the most likely upcoming dings to your credit: card companies and other lenders have started closing inactive accounts in order to limit their liability. As the amount of credit a person has goes down, so does their credit score. I’m not suggesting that you should start charging items to those inactive accounts, though — instead, it’s enough to be aware of them so that if your accounts do close, you won’t be taken by surprise.

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    3. Set Up Automatic Payments

    One of the easiest credit score factors you can control is how good you are about making payments on your current balances. Even if you don’t usually carry a balance, making a payment or two late can cause a preventable dip in your credit score. A simple slip up, like forgetting to send a payment, can have some major consequences. While FICO scores will be offering more leniency for someone who misses only one payment, automatic payments can be a simple way of avoiding even one late payment and any problem at all. Late and missed payments can have ripple affects beyond your actual credit score as well — in some cases, including credit cards, a missed payment on one account can lead to a higher interest rate on another account.

    4. Get Serious About Your Balances

    One of the factors in a good credit score is how much credit you have available. That means that reducing your current balances has a direct connection to helping your credit score. That doesn’t mean that you have to pay off your entire balance immediately to improve your credit score, though: while it’s a good overall goal, just adding a few dollars to your minimum monthly payment is enough to at least get you started on an upwards trend. Moving around debt, say to a zero-interest credit card, doesn’t actually help with your overall credit score. While it may make the amount easier to pay off, it can be reflected in your credit score as an inability to manage your existing credit.

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    5. Keep Your Number of Cards Constant

    While your available credit is a key factor in your credit score, opening a bunch of new credit cards just to increase the amount of credit you have available won’t really help. Instead, the system used to determine credit scores reads such a move as a need for more credit: if you open several cards in a short time span, credit reporting agencies assume that you plan to use that credit and might even be planning to get yourself into some trouble with it. Closing unused credit cards can also have a negative impact on your credit, so keeping your number of cards constant is usually the best compromise between getting the best credit card options and maintaining your good credit score. Your account age can also play into things, by the way. That first credit card you ever got, with its awful interest rate, may be an important part of your credit score. Think carefully before closing such an account.

    Your Credit Score and You

    Despite many ads to the contrary, there is really no way to fix your credit score in a hurry. The Fair Isaac Corporation works hard to make sure that credit scores indicate how you use credit over time, and the company knows what it’s doing. That means that you have to work on maintaining a good credit score long before you want to make a big purchase, like a house or a car. Since it’s not always predictable exactly when a person is going make those large purchases, it makes sense to make a good credit score an ongoing priority.

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    Last Updated on July 23, 2019

    5 Steps To Move Out Of Stagnancy In Life

    5 Steps To Move Out Of Stagnancy In Life

    In the journey of growth, there are times when we grow and excel. We are endlessly driven and hyped up, motivated to get our goals.

    Then there are times when we stagnate. We feel uninspired and unmotivated. We keep procrastinating on our plans. More often than not, we get out of a rut, only to get back into another one.

    How do you know if you are stagnating? Here are some tell-tale signs:

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    • If you have been experiencing chronic procrastination on your goals
    • If you don’t ever feel like doing anything
    • If you keep turning to sleep, eating, games, mindless activities and entertainment for comfort
    • If you know you should be doing something, but yet you keep avoiding it
    • If you have not achieved anything new or significant now relative to 1 month, 2 months or 3 months ago
    • If you have a deep sense of feeling that you are living under your potential

    When we face stagnation in life, it’s a sign of deeper issues. Stagnation, just like procrastination, is a symptom of a problem. It’s easy to beat ourselves over it, but this approach is not going to help. Here, I will share 5 steps to help you move out of this stagnation. They won’t magically transform your life in 1 night (such changes are never permanent because the foundations are not built), but they will help you get the momentum going and help you get back on track.

    1. Realize You’re Not Alone

    Everyone stagnates at some point or another. You are not alone in this and more importantly, it’s normal. In fact, it’s amazing how many of my clients actually face the same predicament, even though all of them come from different walks of life, are of different ages, and have never crossed paths. Realizing you are not alone in this will make it much easier to deal with this period. By trying to “fight it”, you’re only fighting yourself. Accept this situation, acknowledge it, and tell yourself it’s okay. That way, you can then focus on the constructive steps that will really help you.

    2. Find What Inspires You

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    Stagnation comes because there isn’t anything that excites you enough to take action. If you don’t have a habit of setting goals, and instead just leave yourself to daily mundanes, it’s not surprising you are experiencing stagnation. What do you want to do if there are no limitations? If you can have whatever you want, what will it be? The answers to these questions will provide the fuel that will drive you forward.

    On the other hand, even if you are an experienced goal setter, there are times when the goals you set in the past lose their appeal now. It’s normal and it happens to me too. Sometimes we lose touch with our goals, since we are in a different emotional state compared to when we first set them. Sometimes our priorities change and we no longer want to work on those goals anymore. However, we don’t consciously realize this, and what happens is we procrastinate on our goals until it compounds into a serious problem. If that’s the case for you, it’s time to relook into your goals. There’s no point in pursuing goals that no longer inspire you. Trash away your old goals (or just put them aside) and ask yourself what you really want now. Then go for them.

    3. Give Yourself a Break

    When’s the last time you took a real break for yourself? 3 months? 6 months? 1 year? Never? Perhaps it’s time to take a time-out. Prolonged working can cause someone to become disillusioned as they lose sight of who they are and what they want.

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    Go take some extended leave from work. A few days at bare minimum; a few weeks or months will be great. Some of my ex-colleagues have quit their jobs and took months out to do some self-reflection. Of course, some of us might not have that luxury, so we can stick to a few weeks of leave. Go on a trip elsewhere and get away from your work and your life. Use this chance to get a renewed perspective of life. Think about your life purpose, what you want and what you want to create for your life in the future. These are big questions that require deep thinking over them. It’s not about finding the answers at one go, but about taking the first step to finding the answers.

    4. Shake up Your Routines

    Being in the same environment, doing the same things over and over again and meeting the same people can make us stagnant. This is especially if the people you spend the most time with are stagnant themselves.

    Change things around. Start with simple things, like taking a different route to work and eating something different for breakfast. Have your lunch with different colleagues, colleagues you never talked much with. Work in a different cubicle if your work has free and easy seating. Do something different than your usual for weekday evenings and weekends. Cultivate different habits, like exercising every day, listening to a new series of podcasts every morning to work, reading a book, etc (here’s 6 Proven Ways To Make New Habits Stick). The different contexts will give you different stimulus, which will trigger off different thoughts and actions in you.

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    When I’m in a state of stagnancy, I’ll get a sense of what’s making me stagnate. Sometimes it’s the environment I’m in, sometimes it’s the people I’ve been hanging out with, sometimes it’s my lifestyle. Most of the times it’s a combination of all these. Changing them up helps to stir myself out of the stagnant mode.

    5. Start with a Small Step

    Stagnation also comes from being frozen in fear. Maybe you do want this certain goal, but you aren’t taking action. Are you overwhelmed by the amount of work needed? Are you afraid you will make mistakes? Is the perfectionist in you taking over and paralyzing you?

    Let go of the belief that it has to be perfect. Such a belief is a bane, not a boon. It’s precisely from being open to mistakes and errors that you move forward. Break down what’s before you into very very small steps, then take those small steps, a little step at a time. I had a client who had been stagnating for a long period because he was afraid of failing. He didn’t want to make another move where he would make a mistake. However, not wanting to make a mistake has led him to do absolutely nothing for 2-3 years. On the other hand, by doing just something, you would already be making progress, whether it’s a mistake or not. Even if you make a supposed “mistake”,  you get feedback to do things differently in the next step. That’s something you would never have known if you never made a move.

    More to Help You Stay Motivated

    Here are some resources that will help you break out of your current phase:

    Featured photo credit: Anubhav Saxena via unsplash.com

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