For young professionals and anyone looking to improve their financial standing, understanding how to build and maintain a score that’s 700 or higher is important. Here are some practical tips that will help you build a high credit score.
1. Use Credit Cards Wisely
Credit cards can improve your credit score if used correctly. Make regular purchases and pay off the balance each month to show lenders that you can manage credit responsibly.
Additionally, having a long credit history with your credit cards can positively impact your score. Be sure to avoid opening too many new accounts at once, as this can lower the average age of your credit history.
2. Maintain a Low Credit Card Balance
Aim to use no more than 30% of your available credit to show lenders that you can manage your credit wisely. Paying off your balances in full each month is ideal, but if that’s not possible, at least try to keep your balances low. A low credit card balance will have a positive impact on your credit score.
3. Diversify Your Credit Mix
Having a diverse mix of credit accounts is a good way to build a high credit score. This includes a combination of credit cards, auto loans, mortgages, and other types of credit.
A varied credit portfolio shows that you can handle different types of credit well. However, only take on new credit if it makes sense for your financial situation, as unnecessary debt can be detrimental.
4. Regularly Check Your Credit Report
Regularly reviewing your credit report allows you to spot any errors or fraudulent activity that could harm your score. You can obtain a free credit report annually from each of the three major credit bureaus. If you find any discrepancies, report them immediately to get them resolved.
5. Limit Hard Inquiries
A hard inquiry on your credit report occurs whenever you apply for new credit. Too many hard inquiries in a short period can negatively affect your credit score.
Be strategic about applying for new credit and only do so when necessary. Soft inquiries, such as checking your own credit score, do not impact your score and are safe to do regularly.
6. Set Up Payment Reminders
Forgetting payment due dates can lead to late or missed payments, which will lower your credit score. Setting up payment reminders can help ensure you never miss a payment.
Many banks and credit card companies offer reminder services via text or email. Utilizing these tools can help you stay organized and maintain a high credit score by avoiding late payments.
Building and maintaining a high credit score is an ongoing process that requires attention and diligence. By following these tips, you can improve your financial health and unlock better opportunities in the future.
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