It doesn't come wrapped in paper and bows. You won't find it in a stocking or under a tree. One of the best gifts you can give yourself this holiday season is the gift of a better credit score! For many, the holidays are a time of big spending, which is why it's an excellent opportunity to reevaluate your financial situation and get your credit score off the "naughty" list.
Credit scores can seem as magical as Santa Claus himself, but in reality, they are a mathematical aggregation of many facets of your financial situation. Ranging from 300 to 800, they take into account how many accounts you have, how much debt is carried by each account, what your credit limits are, how frequently you make payments, and more. Different kinds of credit, such as auto loans, mortgages, and credit card debt, are all weighed differently. Your overall score is an average of multiple scores provided by several different credit bureaus, each with their own criteria for rating credit. Generally, a credit score above 700 is considered "Good."
Once you understand what your credit score is, set a goal number to aim for and start adjusting your financial course. Increasing your credit score doesn't have the same instant gratification as opening a present – but over time, it's the gift that keeps on giving. Improvements will happen slowly and gradually, but the results will be well worth the wait! Start giving yourself the gift of better credit by following these six tips.
How to Improve Credit
1. Set Payment Reminders
Making timely payments is one of the most important steps you can take toward improving your credit score. Not only do timely payments show financial responsibility, they also signal that you are capable of paying off your debts. To avoid missing payments, set up automatic payments through your online banking portal or set reminders on your personal calendar.
2. Make a Payment Priority Plan
Not all debt is created equal. Some lines of credit come with much higher interest rates than others. Check the balances on all of your credit accounts, get current with any missed payments, and then make a priority list for paying off remaining debt. Focus on paying off the line of credit with the highest interest rate first, but make sure you keep up with regular payments on all accounts.
3. Keep Credit Lines Open
Just because you pay off a line of credit doesn't mean you should close it. Having lines of credit open where you are using 30% or less of the credit available to you can actually help boost your score! It's the kind of healthy credit activity that will land you a spot on the "Nice" list.
4. Don't Move It – Pay It
There are some benefits to consolidating debt or moving a large balance from a high interest line of credit to a lower interest option. That said, the best option is always to pay your debt. Moving debt around can hurt your credit score. If possible, leave the debt where it is and concentrate on paying it off as quickly as possible.
5. Create a Positive History
Your credit history is a large factor in determining your current credit score. People often talk about credit history in terms of how long you have been using lines of credit. While the length of your credit history is a factor, its quality is far more important. Making payments on time and paying off debt will be positive marks on your credit history. If you're looking to build history, build slowly. Opening several lines of credit in quick succession can hurt your credit score and lead to financial burden when it comes time to repay.
6. Stop Using Your Credit Cards
Credit cards have earned a bad reputation over the years, but they are a wonderful tool if used properly and responsibly. That said, if you have racked up sizeable credit card bills, it's time to put the plastic aside until you have your debt in check. Focus on making a strict budget and living within your means while you work to pay down your credit card debt.
Santa won't put you on the "Naughty" list for having a less-than-perfect credit score, but improving your score is certainly a gift worth giving yourself! If sorting through your existing debt is making your inner Grinch shine through, stop by a North Country Savings Bank location and speak with a Personal Banker. Armed with their expert knowledge, you'll be on the road to a very merry credit score.