If you are looking to buy a home, car or you just want to get better with your finances, American State Bank is here to help! Many people don’t realize how much their credit score actually impacts them, so we’re here to give you some helpful tips on how to increase your credit score.

Credit Score Components

You first want to understand what goes into your credit score, so you know how to raise it. You will want to pull a copy of your credit report from each of the three major national credit bureaus: Equifax, Experian and TransUnion. You can do that for free once a year through the official AnnualCreditReport.com website. Then review each report to see what’s helping and hurting your score.

There are many different factors regarding how a credit score is figured, but here are some of the common elements of a FICO Score: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%).

Pay Bills On Time

Paying bills late automatically has an impact on your credit score – not to mention paying any bills late also hurts you in other ways. If you’re buying a home, renting or switching utilities, late payments are calculated into whether you need a deposit or not in some instances. Your payment history, as shown above, is the biggest factor that affects your credit score. Late payments can stay on your credit report for 7.5 years. Showing lots of positive behaviors instead of delinquencies can help offset the damage over time.

Use A Credit Card

A credit card is a great way to improve your credit – especially if you don’t have other large amounts you owe like a mortgage. As long as you are responsible with your credit card, we recommend getting one now if you have very few other areas where credit can be gathered from you. It’s also important to keep your credit cards open unless you need to close them because you have issues with spending. Closing a credit card means you lose that card’s credit limit when your overall credit utilization is calculated, which can lead to a lower score.

Gain Higher Limits

If your income has gone up or you’ve had positive past payments, you’ll probably be eligible to increase your credit limit. Increasing your limit but keeping your credit card balance the same means your revolving utilization goes down – this is a good thing as that’s the next largest impact to your score.

Don’t Apply For New Accounts

The average age of your accounts and inquiries (this is caused from new applications) affect your score as well. So limit the amount of new accounts, such as getting another credit card, in order to keep your credit on the incline.

We hope these suggestions allow you to get ahead on your financial future. Paying attention to your credit score and increasing it will help you get loans for lower interest rates when the time comes. If you’re in need of a loan, reach out to us!